TAX COURT OPINION

Case: Shirley A. Worford
Docket Number: 10209-10
Judge: Holmes
Opinion Type: bench
Filed: 04/01/2011
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 SHIRLEY A. WORFORD, ) Petitioner, v. ) Docket No. 10209-10. COMMISSIONER OF INTERNAL REVENUE, ) ) Respondent O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of transcript of the trial of the above case before Judge Mark V. Holmes at Dallas, Texas on March 9, ,2011, containing his oral findings of fact and opinion rendered after the conclusion of trial. the A decision will besentered for respondent as to the deficiency, and for petitioner as to the penalty. (Signed) Mark V. Holmes ~ Judge Dated: Washington, D.C. April 1, 2011 SERVED APR -52011 3 1 2 3 4 5 6 7 8 9 Bench Opinion by Judge Mark V. Holmes March 9, 2011 Worford v. Commissioner Docket No. 10209-10 THE COURT: The Court has decided to render oral findings of fact and opinion in this case and the following represents the Court's oral findings of fact and opinion. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the 10 • ' Tax Court's Rules of Practice and Procedure. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ms. Worford is a resident of Texas now and when she filed her petition. The record consists of the stipulation that the parties were able to agree on and the exhibits which they both stipulated to. This case began with a notice of deficiency for the 2007 tax year of Ms. Worford and involves about $350,000 in distributions from her traditional IRA. Ms. Worford actually reported almost all of this on her 2007 tax return, but she reported the $300,000 that she did report of IRA distributions received from TD Ameritrade and Texas Capital Bank as nontaxable distributions on line 15a of her return. She had actually received a slight bit more, $350,000, in total IRA distributions during tax year 2007. Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 Ms. Worford does not dispute that she received these distributions; instead she contends that she should not be taxed on the money because she borrowed it from herself with the intention of paying it back at a future date. She used the money, I find, to help finance the remodeling of a home for resale and to help fund a retail business that had encountered difficulties during the recession. She did not,.however, pay the money back or roll it over within 60 days of its distribution, and she went to the IRS and sought oral advice on how to report this on her return. I specifically find that Ms. Worford is entirely honest in her testimony. She's also possessed of a lively entrepreneurial spirit and has built up a business and a real estate business, which is much to be commended, especially in light of the serious difficult personal circumstances regarding her health and her daughter, which I also find to be completely true. The only thing I find difficult to believe in her testimony, in fact, is that she's going to be subject to mandatory withdrawals from her IRA less than a year from now. Nevertheless, there are laws to be followed Heritage Reporting Corporation (202) 628-4888 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 here. And in a case very similar to Ms. Worford's, called Deal v. Commissioner, TC Memo 1999-352, another taxpayer also relied on erroneous advice received from the IRS when she called for information to prepare her return. In that case what we held and what in this case I also have to hold is that the authoritative sources of federal tax law are statutes, regulations, and judicial case law, and not informal IRS sources. See Zimmerman v. Commissioner, 71 TC 367 at 371 (1978) . Additionally, in order to ensure uniform enforcement of the tax law, the IRS Commissioner must follow authoritative sources of federal tax law and has to correct mistakes of law made by IRS agents or employees . This is what the Supreme Court said in a case called Dixon v. United States, 381 US 68 at 72, decided back in 1965. What this means is that the IRS employees -- and I believe you when you say you called them and said that they gave you bad advice, but I have to follow what's in the Internal Revenue Code, because that's what Congress tells me to follow and what the Supreme Court tells me to follow, and there the rule is in section 408(d) (1) of the Internal Revenue Code, Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 6 which says that any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distributee, which is you, Ms. Worford, as the case may be. Now, the IRS also tacked on a negligence penalty in this case, implying that, I guess, they didn't believe you initially, and they thought you were making it up or intentionally disregarding the rules and regulations. And I certainly can't sustain that penalty, especially since Respondent's counsel conceded it in the stipulation, but, again, I have to follow the rules, so I am finding for the IRS in part and for you in part, Ms. Worford, in concluding that for the tax year 2007 there's a deficiency owed of $104,042 but no penalty due under section 6662. Now, Ms. Worford, you also asked to abate the interest in this case, and there is a provision in the Internal Revenue Code, section 6404(f), that requires the IRS to abate interest in most circumstances where there is erroneous written advice. You have erroneous oral advice; nevertheless, you should apply to the IRS first for relief from the interest. You have to do that by filling out a form Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 7 which you can find on the internet, and then if they don't give that to you, you're free to come back to Tax Court, but I don't have what's called jurisdiction, the power to abate interest, because you have to first ask the IRS, and then a judge can review it. You can't ask the judge directly, and that's in section 6404 of the Internal Revenue Code . THIS CONCLUDES THE COURT' S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 11:22 a.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888