TAX COURT OPINION

Case: Robert Joel Otrembiak & Jennifer Ryan
Docket Number: 3649-07S
Judge: Colvin
Opinion Type: bench
Filed: 06/06/2008
Pages: 5

UNITED STATES TAX COURT WASHINGTON, D .C . 2021 7 ROBERT JOE OTREMBIAK AND JENNIFER RYAN OTREMBIAK , Petitioners, v . ) Docket No . 3649-07S COMMISSIONER OF INTERNAL REVENUE , Respondent . O 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 petitioners and to respondent a copy of the pages of the transcript of the trial of the above case before Special Trial Judge Lewis R . Carluzzo at St . Louis, Missouri, on May 21, 2008, containing his 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 with respect to the deficiency and for petitioners with respect to the section 6651(a)(2) addition to tax . (Signed) Lewis R . Carluzzo Special Trial Judg e Dated : Washington, D .C . June 6, 2008 SERVED JUN - 6 2008 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 2 Bench Opinion by Special Trial Judge Lewis R . carluzzo May 21, 200 8 Otrembiak v . Commissioner Docket No . 3649-07 S THE COURT : The Court has decided to rende r oral findings of fact and opinion in this case, and the following represents the Court's oral findings o f fact and opinion . The oral findings of fact an d opinion shall not be relied upon as precedent in any other case . This proceeding for the redetermination of a deficiency is .a Small Tax Case conducted pursuant t o the provisions of section 7463 of the Internal Revenu e Code of 1986, as amended, and Rules 170 through 175 o f the Tax Court Rules of Practice and Procedure . This bench opinion is made pursuant to th e authority granted by section 7459(b) of the Interna l Revenue Code of 1986, as amended, and Rule 152 of th e Tax Court Rules of Practice and Procedure . Hereinafter in this bench opinion, sectio n references are to the Internal Revenue Code of 1986 , as amended, in effect for 2004 . Robert Joel Otrembiak appeared pro se . Michael W . Bitner appeared on behalf of respondent . In a notice of deficiency dated November 20 , 2006, respondent determined a $2,854 .90 deficiency i n Heritage Reporting Corporation (202) 628-4888 3 1 petitioners' 2004 Federal income tax and imposed a 2 $1,603 .98 section 6651(a)(2) addition to tax . 3 Respondent now concedes the addition to tax . 4 The issue for decision is whether a 5 distribution from a qualified retirement plan is 6 subject to the additional tax imposed by section 7 72(t) . The resolution of the issue depends upon 8 whether the distribution was made pursuant to a 9 qualified domestic relations order . See sec . 10 414(p)(1) . 11 Some of the facts have been stipulated and 12 are so found . Petitioners, who were formerly married 13 to each other, filed a joint 2004 Federal income tax 14 return . They resided in Illinois at the time th e 15 petition was filed . References to petitioner are to 16 Robert Joel Otrembiak . 17 In a First Amended Marital Settlemen t 18 Agreement, filed April 6, 2005, in the Circuit Court, 19 Fourth Judicial Circuit, Clinton County, Illinois , 20 (the amended marital settlement agreement) , 21 petitioners agreed to modify a marital settlemen t 22 agreement that had been previously agreed to between 23 them . The details of their previous marita l 24 settlement agreement have not been made part of the 25 record . Heritage Reporting Corporation (202) 628-4888 4 1 During 2004, petitioner requested and 2 received a $28,549 distribution from a qualified 3 retirement plan defined in section 4974(c) (th e 4 distribution) . The proceeds of the distribution were 5 used in part to pay family debts, most of which wer e 6 attributable to Jennifer Ryan . In fact, a portion of 7 the distribution apparently was "rolled" into he r 8 section 401(k) plan . 9 Petitioners included the entire amount of 10 the distribution in the income reported on their 2004 11 Federal income iax return, but the income ta x 12 liability shown on that return does not include the 13 additional tax imposed by section 72(t) . In th e 14 notice of deficiency that forms the basis for thi s 15 case, respondent determined that the section 72(t) tax 16 is applicable to the entire distribution and computed 17 the deficiency here in dispute accordingly . 18 Section 72(t)(1) imposes an additional tax 19 on early distributions from qualified retirement plans 20 "equal to 10 percent of the portion of such amoun t 21 which is includable in gross income ." Petitioner s 22 obviously agree that the distribution is includable in 23 their 2004 income, as it was, in fact, included in the 24 income reported on their 2004 return . Furthermore, it 25 is clear that the distribution was from an accoun t Heritage Reporting Corporation (202) 628-4888 5 1 otherwise subject to sections 72(t) and 4974(c) . 2 There are a number of exceptions to th e 3 imposition of the additional tax imposed by section 4 72(t), but only one need be mentioned here . The tax 5 imposed by section 72(t)(1) is not applicable to "any 6 distribution to an alternate payee pursuant to a 7 qualified domestic relations order (within the meaning 8 of section 414(p) ." Sec . 72(t)(2)(C) . According t o 9 petitioners, the distribution was made pursuant to a 10 qualified domestic relations order, specifically the 11 amended marital settlement agreement referenced above . 12 The problem, or more precisely one problem, 13 with petitioners' claim is that the distribution was 14 not made pursuant to the amended marital settlemen t 15 agreement . That document merely acknowledges an event 16 that occurred in the previous year . It cannot b e 17 determined from the record whether the distribution 18 when made was made pursuant to a .court order that 19 might or might not have qualified as a qualifie d 20 domestic relations order, or by agreement between the 21 petitioners . In any event, it is clear that th e 22 distribution was not made pursuant to the amended 23 marital settlement agreement . Because it cannot be 24 determined whether the distribution was made pursuant 25 to an order described in section 72(t)(2)(C), an d Heritage Reporting Corporation (202) 628-4888