TAX COURT OPINION

Case: Dennison R. Heuer, Jr.
Docket Number: 5076-14
Judge: Kerrigan
Opinion Type: bench
Filed: 01/23/2015
Pages: 8

RMM UNITED STATES TAX COURT WASHINGTON, DC 20217 DENNISON R. HEUER, JR., Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. ) ) ) ) 5076-14. ORD 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 respondent a copy of the pages of the transcript of trial in the above case before Judge Kathleen Kerrigan at Philadelphia, Pennsylvania, on January 13, 2015, containing her oral findings of fact and opinion rendered at the conclusion of the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent. (Signed) Kathleen Kerrigan Judge Dated: Washington, D.C. January 23, 2015 SERVEDJan 262015 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 Bench Opinion by Judge Kathleen Kerrigan January 13, 2015 Dennison R. Heuer, Jr. v. Commissioner Docket No. 5076-14 THE COURT: The Court has decided to render the following as its oral findings of fact and opinion, which shall not be relied upon as precedent in any other case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code (Code) and Rule 152 of the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, all section references are to the Code in effect for the year in issue, and 14 all Rule references are to the Tax Court Rules of 15 16 17 18 19 20 21 22 23 24 25 Practice and Procedure. By notice of deficiency dated January 6, 2014, respondent determined a deficiency of $6,898 and a penalty pursuant to section 6662(a) of $1,380 for tax year 2011. Trial of this case was conducted on January 12, 2015, in Philadelphia, Pennsylvania. Petitioner represented himself. Jonathan E. Behrens represented respondent. The parties stipulation of facts and attached exhibits were admitted into evidence. We find the following facts: 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 FINDINGS Petitioner resided in Delaware when he filed the petition. Petitioner had not reached the age of 59- 1/2 as of December 31, 2011. During tax year 2011, petitioner received a distribution in the amount of $68,983 from his 401(k) qualified retirement plan. ADP Inc. Retirement Services issued a Form 1099-R, 9 Distributions From Pensions, Annuities, Retirement or 10 Profit-Sharing, Plans, IRAs, Insurance Contracts, 11 12 13 14 15 16 17 18 19 etc., to- petitioner reporting a distribution of $68,983. Petitioner filed his 2011 Federal income tax return on November 13, 2012. He reported the $68,983 distribution from his 401(k) qualified retirement plan on his 2011 Form 1040, U.S. Individual Income Tax Return. Petitioner did not report on his 2011 Form 1040 an additional tax equal to 10% of the $68,983 distribution from his 401(k). 20 Petitioner prepared his own tax return. 21 22 23 24 25 OPINION In general, the Commissioner's determinations in a notice of deficiency are presumed correct, and the taxpayer bears the burden of showing that those determinations are erroneous. Rule 142(a); INDOPCO, 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 5 1 Inc. v. Commissioner, 503 U.S. 79,84(1992); Welch v. 2 Helvering, 290 U.S. 111,115(1933). Pursuant to 3 section 7491(a), the burden of proof as to factual 4 matters may shift to the Commissioner under certain 5 6 7 circumstances. We decide this case without regard to the burden of proof. Accordingly, we need not decide 8 whether section 7491(a) applies in this case. 9 Insofar as section 7491(c) is concerned, we note that 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 pursuant to that section, the Commissioner bears the burden of production with respect to any penalty, addition to tax, or additional amount. Even if the 10% additional tax under sec. 72(t) is an "additional amount" for which respondent bears the burden of production, respondent has met such burden by demonstrating that petitioner had not reached the age of 59-1/2, the year in which he received the distribution in 1ssue. See Milner v. Commissioner, T.C. Memo. 2004-111 n.2; H. Conf. Rept. 105-599, at 241 (1998), 1998-3 C.B. 747,995. Section 72(t) imposes an additional 10% tax on the amount of an early distribution from a qualified retirement plan (such as a 401(k)401k) that fails to satisfy one of the statutory exceptions of section 72(t)(2). Petitioner has the burden of proof 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 regarding his entitlement to any of the exceptions provided in section 72(t). See Matthews v. Commissioner, 92 T.C. 351,361-2(1989), aff'd, 907 F.2d 1173 (D.C. Cir. 1990). We have repeatedly held that we are bound by the list of statutory exceptions. Arnold v. Commissioner, 111 T.C. 250,255(1998), Schoof v. Commissioner, 110 T.C. 1,11 (1998). Petitioner contends that he made the 10 withdrawal from his 401(k) due to financial hardship. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 He testified that by making the withdrawal he was able to retain his employees and eventually sell his company. He testified further that the new owners of his company retained the employees. Without making the withdrawal from his retirement account, petitioner believed that he would be unemployed. We have considered similar claims in the past and have observed that there is not authority in no KK. the Code, the legislative history, or caselaw for a general financial hardship exception to the imposition of the 10% additional tax on early distributions. See Arnold v. Commissioner, 111 T.C. at 255; Dollander v. Commissioner, T.C. Memo 2009- 187; Milner v. Commissioner, T.C. Memo 2004-111. 25 While we are sympathetic to petitioner's position, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 the Court may not add an exception to section 72(t) by judicial fiat and we are obliged to thæR apply the K. law as written. See Iselin v. United States, -270 U.S. 245,250-51 (1926). Therefore, petitioner's 5 withdrawal from his retirement account is subject to 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the 10% additional tax penalty. Section 6662(a) imposes a penalty equal to 20% of the portion of the underpayment of tax attributable to a taxpayer's negligence, disregard of rules or regulations, or substantial understatement of income tax. Sec. 6662(a),(b)(1),(2). Respondent has determined that petitioner's underpayment for the taxable year 2011 is attributable to a substantial underpayment of income tax. There is a substantial understatement of income tax if the amount of the understatement exceeds the greater of 10% of the tax required to be shown on the return or $5,000. Sec. 6662(d)(1) (A). Petitioner's understatement of tax was greater than $5,000. Section 6662(d)(2) (B) provides that an understatement attributable to an item may be reduced where the relevant facts were disclosed and the taxpayer had a reasonable basis for treatment of that item. Section 6664(c)(1) provides that the accuracy- related penalty is not imposed on any portion of an 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 underpayment if the taxpayer can establish that he acted with reasonable cause and in good faith. 3 Petitioner has the burden of proving reasonable cause 8 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and good faith. See Higbee v. Commissioner, 116 T.C. 438,446-7(2001). Petitioner prepared and filed his own tax returns. This is not a situation of omission of income or an exaggeration of deductions, but rather the proper reporting of income governed by the Code, the regulations, and the interpretation of the relevant statutory provisions by numerous cases. On the record before us, we are satisfied that petitioner acted in good faith and with reasonable cause with respect to that portion of the underpayment relating to the 10% additional tax under section 72(t). See Dollander v. Commissioner, T.C. Memo 2009-187. Therefore, petitioner is not liable for a penalty pursuant to section 6662(a). We sustain the deficiency as determined by respondent with the exception of the section 6662(a) penalty, and a decision will be entered for respondent. This concludes the Court's oral Finding of Fact and Opinion in this case. (Whereupon, at 2:02 p.m., the above-entitled 866.488.DEPO www.CapitalReportingCompany.com 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 Capital Reporting Company 9 matter was concluded.) 866.488.DEPO www.CapitalReportingCompany.com