TAX COURT OPINION

Case: Robert Tisovich
Docket Number: 16452-18
Judge: Morrison
Opinion Type: bench
Filed: 10/15/2019
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 PA ROBERT TISOVICH, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 16452-18. ORDER OF SERVICE OF TRANSCRIPT 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 in the above case before Richard T. Morrison, at St. Paul, Minnesota, on September 11, 2019, containing his oral fimdings of fact and opinion rendered at the conclusion of trial. In accordance with the oral findings of fact and opinion, a decision will be entered under Rule 155. (Signed) Richard T. Morrison Judge Dated: Washington, D.C. October 15, 2019 SERVED Oct 15 2019 Bench Opinion by Judge Richard T. Morrison 3 SePtember 11, 2019 Robert Tisovich v. Commissioner Docket No. 16452-18 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 ON AS PRECEDENT IN ANY OTHER CASE. 1 2 3 4 5 6 7 8 9 10 This bench opinion is made pursuant to the 11 authority granted by section 7459(b) of the Internal 12 Revenue Code of 1986, as amended, and Rule 152 of the Tax 13 Court Rules of Practice and Procedure. 14 In this bench opinion, unless noted otherwise, 15 all section numbers refer to the Internal Revenue Code of 16 1986, as amended. All Rule numbers refer to the Tax Court 17 Rules of Practice and Procedure. The respondent is 18 referred to as the IRS. The petitioner is referred to as 19 Tisovich. 20 On June 3, 2018, the IRS issued a notice of 21 deficiency for Tisovich's 2015 tax year. The notice of 22 deficiency determined a deficiency of income tax of 23 $156,151 and a section 6662 penalty of $31,230.20. The 24 25 IRS has conceded the penalty. The IRS has also conceded that Tisovich "paid $12,617.79 of qualified solar electric (973)406-2250 j operations@es ribers.net|vMw.escnbersnet 4 property costs such that he is entitled to the appropriate Residential Energy Credit (Form 5695) based on those costs." No credit for the $12,617.70 expenditure was taken into account by the notice of deficiency. The sole non-computational issue for decision is whether a $515,000 IRA distribution is includable in Tisovich's Income in 2015. We hold that it is. Calendar call was held in St. Paul, Minnesota on September 9, 2019. When this case was called the Court 1 2 3 4 5 6 7 8 9 10 granted the parties' joint oral motion to submit the case 11 12 13 14 15 for decision without trial pursuant to Rule 122. Our findings of 0% fact 6ème from the parties' stipulation of facts and the exhibits attached to the stipulation of facts. The parties made their arguments in their respective pretrial memoranda and in an additional 16 document given to the Court by Tisovich that was not 17 18 19 20 21 22 23 admitted as evidence. FINDINGS OF FACT Tisovich was a resident of Minnesota when he filed his petition with this Court. In 2010, Tisovich rolled over a $437,775 from a 401(k) plan with Hartford Life Insurance Company to a traditional IRA, SEP e, or SIMPLE IRA with Vanguard 24 Fiduciary Trust Company. The funds contributed to the 25 Hartford 401(k) were either pre-tax funds from Tisovich or (973) 406-2250|operationseescribersnet j www.escribersaet matching amounts from his employer. There were no other contributions made to the Vanguard IRA other than the 5 rollover amount of $437,775. In 2015, Tisovich received a distribution of $515,000 from the Vanguard IRA. Vanguard issued Tisovich a Form 1099-R, "Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.", that stated the entire $515,000 amount was taxable to Tisovich. Tisovich converted the $515,000 1 2 3 4 5 6 7 8 9 10 distribution to "money", and he continues to hold the 11 "money" in a "safe place". He did not report any taxable 12 distribution on his 2015 income tax return. 13 In 2015, Tisovich paid for and installed 14 qualified solar electric property on his main home. 15 Tisovich paid $12,617.70 for his qualified solar electric 16 property. 17 18 19 return. Tisovich timely filed his 2015 income tax On June 3, 2018, the IRS issued a notice of 20 deficiency for Tisovich's 2015 tax year. The notice 21 22 23 24 25 determined that the entire $515,000 distribution was includable in Tisovich's income. The notice also reduced the personal exemption Tisovich had claimed by $4,000 and increased the net investment income tax due by $1. These last two adjustments appear to follow computationally from cribers 73)406-2250Nperations@escribers.net|www.escribers.net the inclusion of the $515,000 in income. To the extent these two adjustments are noncomputational, Tisovich does not contest them. The notice of deficiency determined a 6 deficiency of $156,151 and that Tisovich was liable for 4 Ñ A section 6662(a) penalty of $31,230.20. The IRS subsequently conceded the penalty and Tisovich's entitlement to a credit regarding the qualified solar expenses. Tisovich timely filed a petition for redetermination with this Court. OPINION We have jurisdiction over this case under section 6213(a). The taxpayer has the burden of proof. See Rule 142(a); see also Rule 122(b). The record does not show 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 that any of the exceptions to this general rule are 17 applicable. Therefore Tisovich bears the burden of proof. 18 19 20 21 Gross income is income from any source. Sec. 61(a). The parties stipulated that Tisovich's Vanguard IRA was one of three types of IRAs: a traditional IRA, a 22 SEP IRA, or a SIMPLE IRA. 23 Section 408(d) establishes the tax treatment of 24 distributions from each of these three types of IRAs. 25 Section 408(d)(1) provides that as a general siumi (973)406-2250ioperationseescribers.net]www.escribersaet 7 rule any amount paid or distributed out of an individual retirement plan is includable in the distributee's gross income in the manner provided in section 72. An individual retirement plan is defined as an individual retirement account described in section 408(a) or an individual retirement annuity described in section 408(b). Sec. 7701(a)(37). An individual retirement account as defined by section 408(a) is a trust created or organized in the 1 2 3 4 5 6 7 8 9 10 United States for the exclusive benefit of an individual 11 or her or his beneficiaries if the trust meets certain 12 13 14 15 other requirements set forth in section 408(a). An individual retirement account is known as an IRA. A traditional IRA is one type of IRA. Because a traditional IRA is a type of IRA, distributions from a traditional IRA 16 are governed by section 408(d). 17 18 A simplified employee pension is an IRA or individual retirement annuity that meets the requirements 19 of section 408(k). A simplified employee pension that is 20 an IRA is known as a SEP IRA. Because a SEP IRA is a type 21 of IRA, distributions from a SEP IRA are governed by 22 23 24 25 section 408(d). A simple retirement account is an individual retirement plan that meets the requirements of section 408(p). A simple retirement account established as an IRA Wimus $733406-2250|operations@escribers.net|wwàescribersnet is known as a SIMPLE IRA. 8 Because a SIMPLE IRA is a type of IRA, distributions from a SIMPLE IRA are governed by section 408(d). Under section 408(d)(1) and section 72, the general rule is that the entire amount of the distribution is taxable in the year of distribution. See sec. 72(a); sec. 1.408-4(a), Income Tax Regs. However, the basis of the funds contributed (e.g., post-tax funds contributed) to the individual retirement plan are excluded from gross income. See sec. 72(b)(1); sec. 408(d)(2). Tisovich does not argue that this rule about basis is applicable. Nor does the record show that the rule is applicable. Section 408(d> <3) provides an exception to the rule in section 408(d)(1). Section 408(d)(3) provides that a distribution from an individual retirement plan is 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 not included in the gross income of the distributee if she 17 18 19 20 21 or he contributes that distribution to an individual retirement account, an individual retirement annuity, or an eligible retirement plan within 60 days of receiving the distribution. Such a distribution is defined as a "rollover contribution". Sec. 408(d)(3). For the purpose 22 of defining a rollover contribution, the term individual 23 24 25 retirement account is defined in section 408(a); the term individual retirement annuity is defined in section 408(b); and the term eligible retirement plan is defined fibers $733406-2250]operations@escribers.net|wwwascribers.net in section 402(c) (8) (B). In general, if a distributee simply receives a distribution and does not contribute it to one of those three financial vehicles, the distribution 9 is includable in income under section 408(d)(1). See Phillips v. Commissioner, T.C. Memo. 2013-42, at *11-*12 (holding that deposit in savings account does not meet criteria for rollover exception). The owner of an IRA can transfer funds tax-free to another IRA if the owner directs the IRA trustee to 1 2 3 4 5 6 7 8 9 10 transfer funds directly to the trustee of another IRA. 11 Rev. Rul. 78-406, 1978-2 C.B. at 157-158. Because the 12 funds are never paid or distributed to the IRA 13 Participant, no rollover contribution or taxable 14 distribution occurs in a direct transfer between trustees. 15 See Dabney v. Commissioner, T.C. Memo. 2014-108, at *12. 16 This transaction is referred to as a "trustee-to-trustee 17 18 19 transfer". Id. Tisovich argues that he withdrew the $515,000 from his IRA and put it in a "safe place" to remove his 20 retirement savings from "the financial system", which he 21 believes is "about to collapse". The stipulated facts do 22 not show that Tisovich's maintenance of the funds in a 23 "safe place" meets the criteria for either rollover 24 25 contribution treatment or trustee-to-trustee treatment. Instead, the record shows that in 2015, Vanguard (973)406-225.0|bperations@escribersnet|wwwescribers.net distributed $515,000 to Tisovich from his IRA. Under 10 the general rule of section 408(d)(1) and regulations interpreting it, the entire $515,000 is included in Tisovich's income. we sustain the notice of deficiency except for the IRS's concessions of the penalty and the credit for the qualified solar expenses. In reaching our holding, we have considered all arguments made, and to the extent not mentioned, we conclude they are moot, irrelevant, or without merit. Given the foregoing, Decision will be entered under Rule 155. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 And OPINION IN THIS CASE. 15 16 17 18 19 20 21 22 23 24 25 (Whereupon, at 5:13 p.m., the above-entitled matter was concluded.) G73)404-2250loperations@escribers.net|www.escribers.net