TAX COURT OPINION

Case: Bryan & Skye Coddington
Docket Number: 14429-11S
Judge: Vasquez
Opinion Type: bench
Filed: 01/31/2012
Pages: 5

UNITED STATES TAX COURT WASHINGTON, DC 20217 RMM BRYAN & SKYE CODDINGTON, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 14429-11S. ) ) ) ) ) ) ) ) ) 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 petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Juan F. Vasquez at Fresno, California, on January 11, 2012, containing his oral findings of fact and opinion rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Juan F. Vasquez Judge Dated. Washington, D.C. January 31, 2012 SERVEDFeb012012 Bench Opinion by Judge Juan F. Vasquez January 11, 2012 Bryan & Skye Coddington v. Commissioner Docket No. 14429-11S 3 THE COURT: The Court has decided to render oral findings of fact and opinion in this case. 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 is the case of Bryan and Skye Coddington, Petitioners, versus Commissioner of the Internal Revenue Service, Respondent, Docket No. 14429-11S. This proceeding was conducted as a small tax case, pursuant to the provisions of section 7463 and Rules 170 through 175. This -bench opinion is made pursuant to the authority granted by virtue of section 7459(b) and Rule 152. . All section references are to the Internal Revenue Code as in effect for the year in issue, in this case, 2008, and all Ñule references are to the Tax Court Rules of Practice & Procedure. Respondent determined a deficiency of $15,835 against Petitioners for their 2008 taxable year, and a $2ß85 accuracy-related penalty under section 6662(a). Petitioners concede that they failed to report $15,034 in wage income received in 2008 and the accuracy- related penalty related to that omission. The issues for 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 Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 O 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 decision are, one, whether a $31, 650 retirement distribution received by Petitioners is includable in Petitioners' 2008 t axable income . We hold that it is . Two, whether Petitioners are subject to the 10 percent additional tax for early distributions under section 72 (t) in the amount of $3,165. We hold that they are. Whether Petitioners are liable for .an .accuracy- related penalty under sdction 6662 (a) for the taxable year 2008. We hold that theý are. The stipulations of fact-s and the attached exhibits.are.incorporated herein by this- reference. At the time the petition was filed, Petitioners lived in San Luis Obispo, California. In 2008 Petit oners received a $31,650 .retirement distribution. from Mr. Cqddington's simplified employee pension plan at Fidelit Investments . Petitioners used $30,000 of the distribution to purchase stock in TSGI Technol"ogies, Inc. P titioner purchased the stock in Mr. Coddington's own narre after Fidelity refused to purchase the funds. Petitioners repoèted the distributión as noñtaxable income on the[ir 2008 return. In general, Reispondent's determinations in the notice of defîciency are entitled to a presumption of córrectness and Petitior ers bear the burden of rebutting that presumptión by a pr ponderance of the evidence. Welch Heritage eporting 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 v. Commissioner, 290 US 111 (1933); Rule 142(a). Petitioners have failed to meet the requirements of section 7491(a) and therefore the burden of proof remains on Petitioners. Generally, a distribution from an individual retirement account, IRA, pf/ 6 if includable in the distributee's income in the year of distribution, as provided in section 72. Section 408(d) (1); Schoof v. Commissioner, 110 T,C,1, 7 (1998). . Section 408(d) (3) provides an exception to this rule for distributions rolled over or transferred into an IRA or other qualified plan. See Crow v. Commissioner, T.C, Memo. 2002-178. Petitioners have failed to adequately establish that any portion of the $31,650 distributions was rolled over into either an IRA or some other eligible retirement plan. See section 408(d) (3). Thus, the $3 650 distribution is included in Petitioners' taxable income. Section 72(t) (1) imposes a 10 percent additional tax on early distributions from qualified retirement plans. Section 72(t) (2) (A) lists the type of distributions to which the additional tax does not apply. Petitioner has the burden of proving his entitlement to any of these exceptions. See Bunney v. Commissioner, 114 T.C, 259 (2000). 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 Petitioners have not produced any evidence that any exception applies irl this case . Accordingly, we sustain Respondent' s determination as to the section 72 (t) additional tax. Petitioners.have understated more than 10 percent of the tax required to be shown on their 2008 return, and that understatement excÅeds 5,000 . .Thus Respondent has met his burden of production with respect to the accuracy- related penalty under section 6662 (a) . The accuracy-felated penalty is not imposed with respect to any portion cf the underpayment as to which taxpayer shows that he ór she acted with reasonable cause and in good faith. Sectiion 6664 (c) (1) ; Higbee .v. Commissioner, 116 T,C, 438, 448 (2001) . c½J Petitioners offered no evidence that they acted with reasonable cause arid in good faith; Petitioners failed to show they acted in good faith and had reasonable cause. See section 6664 (c) (1) . Thus Petitioners are liable for the accuracy- related penalty. The f oregoing trepre sent s the Court ' s oral f indings of f act and opinion in tihis case . In reaching our holdings herein, we have considered all argùments niade, and to the extent not mentioned above, we conclude that they are moot, irrelevant, or without tàerit . Heritage R.eporting Corporation (202) 628-4888