TAX COURT OPINION

Case: Paul Albert Knittle
Docket Number: 6117-11
Judge: Kroupa
Opinion Type: bench
Filed: 07/11/2012
Pages: 5

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 PAUL ALBERT KNITTLE, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondpnt. ) ) ) ) ) ) ) ) ORDER Docket No. 6117-11 Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit to petitioner and to respondent a copy of the pages of the transcript of proceedings of this case before Judge Diane L. Kroupa in Honolulu, Hawaii on June 18, 2012, co taining her oral findings of fact and opinion rendered at the trial session at which the case was e lendared. In accordance with the oral findings of fact and opinion, an appropriate decision will be entered for respondent. (Signed) Diane L. Kroupa Judge Date: Washington, DC July 10, 2012 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 3 Bench Opinion by Judge Diane L. Kroupa June 18, 2012 Knittle v. Commissioner Docket No. 6117-11 THE CODRT: The Court has decided to render oral findings of fact and opinion in this ase, and the following represents the Court's oral findings of fact and opinion These oral findings of fact and opinion shall no be relied upon as precedent in any other case. This bench opinion is made pursuant to the authority granted in § 7459(b) and Rule 152. All section references are to the Internal Revenue Code as amended and in effect for 2008, and all rule references are tò the Tax Court Rules of Practice and Procedure. Petitioner appeared pro se. David Lau appeared on behalf of Respondent. Findings of Fact and Opinion. Certain facts have been stipulated. The stipulation of facts the parties filed, w th accompanying exhibits, is incorporated by this reference. The facts are so found. Respondent determined a $1,525 ircome tax deficiency again3t Petitioner for 2008. Petiti ner does not deny he is stbject to the 10 percent additional tax on.an early distribution 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 4 from a qualified plan of his. Petitioner does dispute, however, that a student loan creditor should have abided by its agreement that Petitioner did not owe any amount of unpaid student loans. Additionally, Petitioner asked Respondent 0.sKs to not charge him any interest or penalties. We now turn to the issues still in dispute. . First, we decide whether the unreported distribution from Petitioner's retirement account is subject to a 10 percent additional tax under § 72(t). Section 72(t) imposes an additional 10 percent tax on the amount of an early distribution from a qualified retirement account (as defined in § 4974 (c)). See § 72(t). Section 72(t) (2) provides for certain exceptions to the imposition of this 10 percent tax. Petitioner received the distribution from his retirement plan at ING Life Insurance a2d Annuity Company, which was a qualified retirement plan under § 4974(c) (4). Petitioner testified that the money was withdrawn to pay his credit card debt from 2is gambling habit. However unfortunate Petitioner's situation may be, there is no exception under § 72(t) for financial hardship. This principle has been applied consistently in cases dealing with premature 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 distribution from retirement accounts. S e Arnold v. Commissioner, 111 T.C. 250, 255 (1998); Milner v. Commissioner, T.C. Memo 2004-111; Gallagher v. Commissioner, T.C. Memo 2001-34; Deal v. Commissioner, T.C. Memo 1999-352. The legislative purpose underlying the § 72(t) tax is that "premature distributions from retirement accounts frustrate the intention of saving for retirement, and § 72(t) discourages t is from happening." Dwyer v. Commissioner, 106 T.C. 337, 340 (1996). See also S. Rept. 93-383 at 134 (1973), 1974-3 C.B. (Supp.) 80, 213. To avoid the § 72(t) tax, Petitioner must show that the distribution falls within one of the exceptions provided under § 72(t) (2) (A). He has not done so. Thus, the 10 percent tax under § 72(t) applies to the distribution Petitioner received from his retirement plan during 2008. We accordingly sustain Respondent's determination in the deficiency notice that Petitioner is liable for the early withdrawal tax under § 72(t). We next address whether Responde t acted inappropriately in applying Petitioner's refund to his outstanding student loan. We find that Respondent acted appropriately. Respondent is authorized to 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 apply a refund (or overpayment as used in the Code) whenever Respondent·receives notice from any federal agency that the taxpayer owes a past-due, legally enforceable debt. Sec. 6402(d). There is nothing in the record that Respondent acted inapprop iately. We finally address whether Respondent should not charge Petitioner any interest or penälties . We note that Respondent has not determined Petitioner liable for any penalties. As to the interest, we found Petitioner credible. We cannot, however, stop Respondent from charging interest on the npaid tax balance for 2008. To reflect the foregoing, decision will be for Respondent. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 10:15 a.m. the bench opinion in the above-entitled matter was concluded.) // // // // // // Heritage Reporting Corporation (202) 628-4888