TAX COURT OPINION

Case: Robert S. Daniel
Docket Number: 26044-11
Judge: Halpern
Opinion Type: bench
Filed: 01/18/2013
Pages: 5

UNITED STATES TAX COURT WASHINGTON, DC 20217 ROBERT S. DANIEL, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 26044-11. ) ) ORDE 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 to respondent a copy of the pages of the transcript of the trial in the above case before Judge James S. Halpern at Los Angeles, California, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered under Rule 155. (Signed) James S. Halpern Judge Dated: Washington, D.C. January 18, 2013 SERVED JAM 2 2 2013 Capital Reporting Company 3 Bench Opinion by Judge James S. Halpern December 11, 2012 Robert S. Daniel v. Commissioner Docket No. 26044-11 THE COURT: 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 bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. Respondent has determined a deficiency of $5,812 in Petitioner's Federal income tax for 2009 and an accuracy-related penalty of $1,162 under section 6662(a). We must decide whether petitioner has income under section 72(p) on account of two deemed distributions from (1) a section 401(k) employee retirement plan and (2) a section 457 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 4 1 deferred compensation plan (together, the plans). We 2 must also decide whether petitioner is subject to a 3 4 5 6 7 8 9 10% tax under section 72(t) and whether he has reasonable cause for any resulting underpayment of tax. The parties have stipulated certain facts. The stipulation of facts, with attached exhibits, is incorporated herein by this reference. The issue before us with respect to the 10 plans is described in section 1.72 (p)-1, Q&A- 10 . e $ 11 Petitioner borrowed money from the administrator of 12 13 14 the plans and failed to make repayments when due so that those failures constituted "deemed distributions" within the meaning of the regulation. 15 Petitioner argues that, contrary to the regulation, 16 17 18 19 20 21 22 23 24 25 he had income in the years the proceeds were distributed to him and not in the year determined under the regulations. Generally, income from discharge of indebtedness is income in the year of the discharge. Sge s 5 (1(a) (12). Petitioner has failed to make a cogent'argument as to the invalidity of the regulation. We shall sustain the adjustment to gross income giving rise to the deficiency, subject to the parties correction of errors pursuant to Rule 155. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 Petitioner concedes that, to the extent he has income under section 72 (p), he is subject to the section 72(t) additional tax on early distributions. Section 6662(a) imposes an accuracy related penalty equal to 20% of any underpayment resulting from a substantial understatement of income tax or from negligence. Respondent has demonstrated that petitioner's underpayment results from a substantial understatement of income tax. Section 6664 (c) contains a reasonable cause exception to application of the penalty. The determination of whether a taxpayer acted with reasonable cause and in good faith depends on the pertinent facts and circumstances, including the taxpayer's efforts to assess his or her proper tax liability, the knowledge and experience of the taxpayer, and the taxpayer's reliance on the advice of a professional. Sec. 1.6664-4(b) (1), Income Tax Regs. The taxpayer bears the burden of proof with respect to the reasonable cause and good faith defense. Sec. 7491(c); Rule 142(a); Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Petitioner has failed to demonstrate that he acted with reasonable cause and in good faith in omitting the amounts with respect to the plans reported to him as 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 6 2009 taxable retirement income. We sustain respondent's determination of an accuracy-related penalty for 2009. That concludes the Court's oral findings of fact and opinion in this case. Decision will be entered under Rule 155. (Whereupon, at 10:19 a.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