TAX COURT OPINION

Case: Lynda J. DeLellis
Docket Number: 9411-07S
Judge: Colvin
Opinion Type: bench
Filed: 11/18/2008
Pages: 8

a UNITED STATES TAX COURT WASHINGTON, DC 2021 7 LYNDA J . DeLELLIS, Petitione r v . ) Docket No . 9411-07S . SF_ COMMISSIONER OF INTERNAL REVENUE , Respondent 0 R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial of the above case before Judge L . Paige Marvel at Winston-Salem, North Carolina, November 3, 2008, containing her oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed) L. Paige Marvel Judge Dated : Washington, D .C . November 18, 2008 SERVED N 18 2008 IN THE UNITED STATES TAX COUR T 1 In the matter of : LYNDA J . DELELLIS, Petitioner, Docket No . 9411-07S v . COMMISSIONER OF INTERNAL REVENUE , Respondent . Room 84 7 Hiram H . Ward Federal Building 251 North Main Street Winston-Salem, North Carolin a Wednesday, November 5, 200 8 The above entitled matter came on for bench opinion pursuant to notice, at 9 :15 a .m . BEFORE : HONORABLE L . Paige Marvel Judg e APPEARANCES : For the Petitioner : Lynda J . DeLellis, pro se For the Respondent : J . Craig Young Internal Revenue Servic e Heritage Reporting Corporation (202) 628-4888 2 1 P R O C E E D I N G S 2 (9 :15 a .m .) 3 THE CLERK : Calling Docket No . 9411-07S , 4 Lynda J . DeLellis . 5 (Whereupon, a bench opinion was rendered in 6 the above-entitled matter . ) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Heritage Reporting Corporation (202) 628-4888 3 1 Bench Opinion by Judge L . Paige Marvel November 5, 2008 2 Docket No . 9411-07S Lynda J . DeLellis v . Commissioner 3 THE COURT : The Court has decided to render 4 oral findings of fact and opinion in this case and the 5 following represents the Court's oral findings of fact 6 and opinion . The oral findings of fact and opinio n 7 shall not be relied upon as precedent in any other 8 case . 9 This proceeding for the redetermination of a 10 deficiency is a Small Tax Case conducted pursuant to 11 the provisions of section 7463 of the Internal Revenue 12 Code as amended and Rules 170 through 175 of the Tax 13 Court Rules of Practice and Procedure . This benc h 14 opinion is made pursuant to the authority granted by 15 section 7459(b) of the Internal Revenue Code of 1986 16 as amended and Rule 152 of the Tax Court Rules o f 17 Practice and Procedure . 18 Unless otherwise indicated, subsequen t 19 section references made in this bench opinion are to 20 the Internal Revenue Code of 1986 as amended and in 21 effect for the relevant period and subsequent rul e 22 references are to the Tax Court Rules of Practice and 23 Procedure . 24 Petitioner, Lynda J . DeLellis, appeared pro 25 se . J . Craig Young appeared on behalf of respondent . Heritage Reporting Corporatio n (202) 628-4888 4 1 FINDINGS OF FAC T 2 Some of the facts have been stipulated . The 3 stipulated facts are incorporated into these findings 4 by reference . 5 Petitioner, Lynda J . DeLellis , who was a 6 resident of Kannapolis, North Carolina when she filed 7 her petition in this case , was born in 1949 . During 8 2004, petitioner, who had not yet attained the age of 9 59 1/2 years old, withdrew from her 401(k) account a t 10 Fidelity Investments the sum of $46,350 because of 11 certain financial difficulties that she wa s 12 experiencing . Petitioner was behind on her mortgage 13 payments and owed substantial amounts of money for 14 utilities, credit cards, and other expenses because 15 she had used her available funds to help severa l 16 family members who were in financial straits . 17 When petitioner prepared and filed her Form 18 1040 for 2004, petitioner reported the prematur e 19 distribution from her Fidelity account but did not 20 include the 10-percent additional tax imposed by 21 section 72(t) of the Internal Revenue Code . 22 Petitioner contends that she is not liable 23 for the section 72(t) additional tax on the 200 4 24 premature distribution because the distribution was 25 the result of the extreme financial hardship she was Heritage Reporting Corporatio n (202) 628-4888 5 1 experiencing in 2004 . Petitioner claims, and we 2 accept her testimony as credible, that a Fidelit y 3 representative told her she could withdraw the funds 4 from her account for financial hardship and th e 5 representative never told her that she would owe 6 additional tax under section 72(t) by doing so . 7 Respondent contends that there is n o 8 exception under section 72 for premature distributions 9 attributable to financial hardship . Consequently , 10 respondent asserts that petitioner is liable for a 11 deficiency as determined in the notice of deficiency 12 that was mailed to petitioner on January 5, 2007 . 13 Respondent, however, has conceded the sectio n 14 6651(a)(1) addition to tax determined in the notice of 15 deficiency . 16 DISCUSSION 17 Section 402 provides that distributions from 18 an employee's trust, such as a plan under sectio n 19 401(k), shall be taxable to the distributee unde r 20 section 72 . Section 72(a) provides that gross income 21 includes any amount received as an annuity except as 22, otherwise provided in chapter 1 of the Interna l 23 Revenue Code . 24 Section 72(t)(1) imposes an additional tax 25 of 10-percent on the portion of a distribution from a Heritage Reporting Corporatio n (202) 628-4888 i 6 1 qualified retirement plan that is includable in gross 2 income, unless the distribution falls under one of the 3 exceptions in section 72(t)(2) . A distribution made 4 on or after the date on which the employee attains age 5 59 1/2 is generally not subject to the additional tax . 6 Sec . 72(t)(2)(A)(I) . The parties do not dispute that 7 petitioner's Fidelity account was a qualifie d 8 retirement plan or that petitioner had not ye t 9 attained the age of 59 1/2 when she received the 2004 10 distribution . 11 Petitioner has not established that sh e 12 comes within any of the exceptions to the general rule 13 under section 72(t)(1) . Petitioner, however, contends 14 that she should not be subject to the 10-percen t 15 additional tax because of her extreme financia l 16 hardship . Although we sympathize with petitioner's 17 financial hardship and recognize that the Fidelit y 18 representative failed to tell petitioner about the 10- 19 percent additional tax, there is no financial hardship 20 exception under section 72(t)(2) that cover s 21 petitioner's situation . See Arnold v . Commissioner , 22 111 T .C . 250, 255-256 (1998) ; Milner v . Commissioner , 23 T .C . Memo . 2004-111 ; Gallagher v . Commissioner , T .C . 24 Memo . 2001-34 . Consequently, the distributio n 25 petitioner received is subject to the 10-percent Heritage Reporting Corporatio n (202) 628-4888 7 1 additional tax under section 72(t) . We hold therefore 2 that petitioner is liable for the 2004 income tax 3 deficiency as determined by respondent . 4 Decision will be entered for respondent . 5 This concludes the Court ' s oral findings of 6 fact and opinion in this case . 7 (Whereupon, the bench opinion in the above- 8 entitled matter was concluded . ) 9 10 11 // 12 // 1 3 14 // 1 5 16 // 1 7 18 19 // 2 0 21 22 23 / / 24 25 // Heritage Reporting Corporation (202) 628-4888