TAX COURT OPINION

Case: Lawrence M. Logue
Docket Number: 21203-12S
Judge: Gale
Opinion Type: bench
Filed: 09/18/2013
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 LAWRENCE M. LOGUE, ) Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ORDE R 21203-12S. ) ) Docket No. ) ) ) ) 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 the transcript in the above case before Judge Joseph H. Gale for the Los Angeles, California trial session on September 10, 2013, containing his oral findings of fact and opinion. Decision will be entered for respondent with respect to the deficiency in accordance with the oral findings of fact and opinion. (Signed) Joseph H. Gale Judge Dated: Washington, D.C. September 18, 2013 SERVED SEP 1 9 2013 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Bench Opinion by Judge Joseph H. Gale September 10, 2013 Lawrence M. Logue v. Commissioner Docket No. 21203-12S Judge: 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. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. This case was heard as a Small Tax Case pursuant to the provisions of section 7463 of the Internal Revenue Code in effect when the petition was filed. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. 16 All section references are to the Internal Revenue 17 18 19 20 21 22 23 24 25 Code in effect for the year at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. Petitioner Lawrence M. Logue appeared on his own behalf. Sameera Hasan appeared on behalf of respondent. Respondent determined a deficiency in petitioner's 2010 income tax of $1,450, on the grounds that (1) petitioner failed to report the 10 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 percent additional tax due upon a distribution from a qualified retirement plan made before the recipient attains age 59-1/2; and (2) petitioner failed to report $25 in taxable interest income. Respondent has now conceded the second basis. The issue that remains for decision is whether the deficiency is correct as determined by respondent. BACKGROUND Some of the facts have been stipulated and are so found. Petitioner resided in California at the time he filed his petition. During 2010, petitioner received five distributions from an individual retirement account (IRA), totaling $14,500.. For each withdrawal, petitioner completed a form provided by Bank of America, the payor of the distributions, declaring that he was under the age of 59-1/2 at the time of the distributions, and electing to have Bank of America withhold 10 percent of the distribution for Federal income tax. Bank of America withheld a total of $1,450 from the distributions made in 2010 and reported this amount to petitioner and to the Internal Revenue Service on Form 1099-R. Petitioner was age 57 at the end of taxable year 2010. Petitioner timely filed his Form 1040, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 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 Individual Income Tax Return, for taxable year 2010. On the return, he reported as his only income the $14,500 in distributions made from his IRA. He further reported $518 as the tax due, but left blank line 58 on the return where any additional tax on an IRA distribution was required to be reported. Treating $518 as the total tax due, petitioner then claimed a refund of $932; that is, the difference between the $1,450 that had been withheld by Bank of America and the $518 in tax petitioner reported on the return as due. On May 16, 2011, a $932 refund was issued to petitioner. Respondent thereafter on July 9, 2012, issued petitioner a timely notice of deficiency for 2010, in which it was determined that petitioner failed to report $25 in interest income and that petitioner was liable for $1,450 in tax on an IRA distribution that had not been reported on line 58 of his return. As noted, respondent now concedes the adjustment pertaining to the $25 in interest income. Petitioner timely filed a petition for redetermination of the deficiency. DISCUSSION Respondent's determinations in the notice of deficiency are presumed correct and petitioner 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 bears the burden of proving that the determinations are in error. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Distributions from an IRA are generally included in gross income. Sec. 408(d) (1). The exceptions to this general rule are enumerated in section 408(d) and are not relevant here. Section 72 (t) (1) imposes a 10 percent additional tax on distributions from a qualified retirement plan unless one of a series of exceptions applies. The exceptions, enumerated in section 72(t) (2), include distributions made after the taxpayer attains age 59-1/2, and others not relevant here. Section 4974 (c) (4) includes IRAs in the definition of qualified retirement plans. Thus, when a taxpayer receives a distribution from an IRA, that distribution incurs the regular income tax applicable to income in that amount and, where the recipient has not attained the age of 59-1/2, an additional tax of 10 percent. Petitioner does not dispute that he received distributions during 2010 from the IRA he 22 maintained at Bank of America totaling $14,500 or 23 24 25 that those distributions were subject to a 10 percent additional tax. Instead, he maintains that he paid the additional tax by virtue of the withholdings that 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 were made by the Bank of America. However, petitioner's claim is contradicted by the documentation of those distributions, petitioner's own income tax return, and respondent's certified account transcripts for petitioner's 2010 taxable year.. Simply put, while petitioner indeed had $1,450 7 withheld from his IRA distributions by Bank of 8 9 10 11 America, he claimed $518 of the amount withheld to pay the regular income tax liability he reported on his return as attributable to the distributions. On his 2010 return, he neither reported, nor used any 12 withholdings to pay, the $1,450 amount of the 10 13 14 15 16 17 18 19 20 21 22 23 24 percent additional tax that was due on the distributions. Instead, he claimed and received a $932 refund of the amounts that had been withheld by Bank of America. Consequently, respondent's determination that petitioner has an income tax deficiency of $1,450 for 2010 attributable to the 10 percent additional tax on his IRA distributions for the year is correct. One final note. Although respondent has conceded the issue of whether petitioner had $25 of taxable interest income that he failed to report for 2010, the elimination of the asserted $25 increase in 25 petitioner's taxable income for 2010 does not change 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company the amount of the deficiency respondent determined. That is because, as the Tax Tables included in the instructions for the 2010 Form 1040 indicate, a tax of $518 (as petitioner reported) applies with respect to taxable income of at least $5,150 but less than $5,200. Consequently, the additional $25 that respondent now concedes should not have been added to petitioner's taxable income for 2010 had no effect on the deficiency determined for that year, because the increase in petitioner's taxable income from $5,150 to $5,175 would not have changed the tax due of $518. The deficiency of $1,450 is attributable entirely to the 10 percent additional tax on early distributions from an IRA. To reflect the foregoing, decision will be entered for respondent. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 5:11 p.m., the above- entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com