TAX COURT OPINION

Case: Donald Alan Haselhoff
Docket Number: 2665-07S
Judge: Colvin
Opinion Type: bench
Filed: 04/18/2008
Pages: 6

UNITED STATES TAX CdURT Washington, D .C . 2dd21 7 DONALD ALAN HASELHOFF , Petitioner, V . D cket No . 2665-07 S COMMISSIONER OF INTERNAL REVENUE, Respondent . O R D E R RECORDE D E I SERV -CC-~~ ~~~ -- --~~ "bM fl STAT . S .T . JUDGE FILE S Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court to petitioner and to respondent a copy o transcript of the trial of the above cas Judge Lewis R . Carluzzo at Fresno, Cali containing his oral findings of fact an conclusion of trial . shall transmit herewith f the pages of th e e before Special Trial ornia, on March 26, 2008, opinion rendered at th e In accordance with the oral findings of fact and opinion, decision will be under Rule 155 . (Signed ) Lewis R. Carluzzo Special Trial Judg e Dated : Washington, D .C . April 18, 2008 SERVED APR 2 2 2000 3 1 Bench Opinion by Special Trial Judge Lewis R . Carluzz o 2 March 26, 200 8 3 Donald Alan Haselhof f Docket No . 2665-07S 4 THE COURT : The Court as decided to render oral 5 findings of fact and opinion in this case and the followin g 6 represents the Court's oral findings of fact and opinion . 7 The oral findings of fact and opinion shall not be relied 8 upon as precedent in any other case . 9 This proceeding for thle redetermination of a 10 deficiency is a Small Tax Case conducted pursuant to the 11 provisions of section 7463 of the Internal Revenue Code of 12 1986, as amended, and Rules 170 through 175 of the Tax Court 13 Rules of Practice and Procedure . 14 This bench opinion is! made pursuant to th e 15 authority granted by section 7459(b) of the Internal Revenue 16 Code of 1986, as amended , and Mule 152 of the Tax Cour t 17 Rules of Practice and Procedure . 1 18 Hereinafter in this bench opinion, sectio n 19 references are to the Interna l Revenue Code of 1986, a s 20 amended, in effect for 2005 . Mule references are to the Tax 21 Court Rules of Practice and Procedure . 22 Donald Alan Haselhoff appeared pro se . Matthew A . 23 Mendizabal appeared on behalf~of Respondent . 1 24 In a notice of deficiency dated December 15, 2006 , 25 Respondent determined a deficiency of $10,571 in Heritage Reporting Corporatio n (202) 628-4888 4 1 Petitioner's 2005 Federal incomejtax . The issue fo r 2 decision is whether the ten perc ent additional tax impose d 3 , by section 72(t) is applicable o certain distributions that 4 Petitioner received from his quo'lified retirement account s 1 5 during the year in issue . 6 Some of the facts have been stipulated and are s o 7 found . At the time the petition was filed , Petitioner 8 resided in California . 9 Petitioner was born in 11948 . He had been employed 10 as a civil engineer for many years prior to being laid of f 11 in 2003 . As of the close of 2003, Petitioner was 55 years 12 old . While employed, Petitioner participated in a sectio n 13 401(k) retirement plan made ava ilable to him through hi s 14 then-employer . 15 After a period of unettployment, Petitioner began 16 working for a different employer, but was once again laid 17 off in 2005 . During that year he withdrew $112,854 from 18 various individual retirement accounts (IRAs) (th e 19 distributions) . The IRAs wereiopened with funds withdrawn 20 and rolled over from the above-referenced 401(k) plan tha t 21 was terminated when Petitioner ; was laid off in 2003 . 22 Petitioner included the distributions in the income 23 reported on his timely-filed 2 1005 Federal income tax return , 24 but did not treat all of the distributions as subject to the 25 additional tax imposed by section 72(t) . Heritage Reporting Corporation (202) 628-4888 5 1 In the notice of deficiency, Respondent imposed the 2 section 72(t) tax on the entire amount of the distributions 3 and computed the deficiency here in dispute accordingly . 4 Respondent now agrees that the deficiency determined in the I 5 notice of deficiency is overstated . 6 Section 72(t)(1) imposes an additional tax on early 7 distributions from qualified re irement plans "equal to te n I 8 percent of the portion of such $mount which is includable in 9 gross income ." Petitioner obviously agrees that th e 10 distributions are includable in his 2005 gross income, a s 11 they were in fact included in i hcome reported on his 200 5 12 return . Furthermore, it is clear that the distribution s 13 were from accounts otherwise si4bject to section 72(t) and 14 4974(c), and Petitioner does not suggest otherwise . 15 There are a number of exceptions to the imposition 16 of the additional tax imposed by section 72(t), but only on e 17 need be mentioned here . Secti n 72(t) ( 2) (A) (v) provides a n 18 exception for distributions "made to an employee after 19 separation from service after attainment of age 55 . " 20 Petitioner was "separated from service after attainment o f 21 age 55" both in 2003 and 2005 . The above-quoted exception , 22 although applicable to distributions from a 401(k) account , 23 does not apply to a distribution from an IRA . Sec . 24 72 (t) (3) (A) . 25 Nevertheless, relyin~ upon the above exception, Heritage Reporting Corporatio n (202) X28-4888 6 1 Petitioner argues that the distribution from his 401 ( k) plan 2 in 2003 would not have been subject to the section 72(t) tax 3 had he not rolled over those funds into the IRAs . i According 4 to Petitioner , because the fund from the 401 (k) plan were 5 merely rolled over into the IRA , the distribution should b e 6 treated as though made from a 4 1(k) plan, and therefore no t 7 subject to the section 72(t) additional tax . 8 Respondent agrees that the distribution fro m 9 Petitioner's 401(k) account in 003 would not have bee n 10 subject to the section 72(t) act ditional tax, but argues tha t 11 because the 2003 distribution A as rolled over into the IRAs , 12 the distributions must be treated as distributions from an 13 IRA, regardless of the source of the founds . For the 14 following reasons, we agree with Respondent . 15 In Gee v . Commissione, 127 T .C . 1 (2006), we held 16 that for purposes of section 7~(t), funds rolled over from 17 one retirement account to another lose whateve r 18 characteristics were attributable to those funds while on 19 deposit in the account that provided the source of th e 20 rolled-over funds . Instead, we held that distributions from 21 a retirement account are treated according to the rule s I 22 applicable to that type of retirement account, regardless 23 of the source of the funds on~deposit in the account . 24 We understand Petitioner's point that th e 25 distribution made from his 40i(k) plan in 2003 would not Heritage Repor~ing Corporatio n (202) 628-4888 7 1 have been subject to the section 72(t) additional tax ha d 2 that distribution not been rolled over into the IRAs fro m 3 which the distributions here in dispute were made, but the 4 distribution from the section 4 1(k) plan in 2003 was rolled S over into the IRAs . Consequent y, and for the reason s 6 discussed in Gee , the distributions here in dispute ar e 7 treated pursuant to the rules governing distributions from 8 an individual retirement accou t, not from a section 401(k) 9 plan . To the extent not alrea y taken into account, i t 10 follows that the section 72(t) additional tax is applicable 11 to the distributions, and Resp?ndent's determination to that 12 end is sustained . 13 To reflect the forego - ng, and to take into account 14 Respondent's concessions and the amount of the section 72(t) 15 tax already shown on Petitionekr's 2005 return, decision will 16 be entered under Rule 155 . 17 This concludes the C urt's oral findings of fact C, 18 and opinion in this case . 19 (Whereupon, at 10 :00 ;'a .m ., the bench opinion in the 20 above-entitled matter was concluded . ) 21 // Heritage Reporting Corporation (202) 'j628-4888