TAX COURT OPINION

Case: Nader Ghazitehrani and Farzaneh Zamanizadeh
Docket Number: 12653-05S
Judge: Panuthos
Opinion Type: summary
Filed: 10/23/2006
Pages: 6

T .C . Summary Opinion 2006-17 0 UNITED STATES TAX COUR T NADER GHAZITEHRANI AND FARZANEH ZAMANIZADEH, Petitioners v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 12653-05S . Filed October 23, 2006 . Nader Ghazitehrani and Farzaneh Zamanizadeh, pro sese . Aimee R . Lobo-Berg , Thomas J . Travers , and Anna L . Roone y (specially recognized), for respondent . PANUTHOS, Chief Special Trial Judge : This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect at the time the petition was filed . The decision to be entered is not reviewable by any other court, and this opinion should not be cited as authority . Unless otherwise indicated, subsequent section references are to the Interna l $r.b ' OCT 2 3 2006 - 2 - Revenue Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure . Respondent determined a deficiency of $2,338 in petitioners ' 2002 Federal income tax . The issue for decision is whether a distribution from a qualified retirement plan is subject to the 10-percent additional tax under section 72(t) . Background Some of the facts have been stipulated, and they are so found . The stipulation of facts and the attached exhibits are incorporated herein by this reference . At the time the petition was filed, petitioners resided in Vancouver, Washington . Unless otherwise indicated, all references to petitioner are to Mr . Ghazitehrani . Beginning in 1988, petitioner worked as an engineer for the Boeing Company (Boeing) . Boeing maintained a section 401(k) retirement plan to which petitioner contributed . In or about 1999, petitioner borrowed approximately $32,000 from the retirement plan . Petitioner was terminated from Boeing in 2002, when he was approximately 53 years old . At that time, the unpaid balance of the loan from the retirement plan was $23,378 . Petitioner s reported that amount as a taxable distribution on their joint 2002 Federal income tax return but did not report a 10-percent 3 - additional tax on the distribution . Petitioners prepared their tax return using TurboTax, a tax preparation software program . Respondent determined that the $23,378 distribution wa s subject to a 10-percent additional tax under section 72(t) . Respondent issued petitioners a notice of deficiency on April 18, 2005 . Petitioners timely petitioned the Court for redetermination of the deficiency . At some point after the petition was filed, petitioners were divorced . At trial, Ms . Zamanizadeh indicated that she wished to seek relief under section 6015, which is commonly referred to as innocent spouse relief . Petitioner stated that he did not object to Ms . Zamanizadeh's being granted relief . The Court held the record open to-permit Ms . Zamanizadeh to file an administrative claim with respondent . In September 2006, respondent informed the Court that Ms . Zamanizadeh had been granted relief under section 6015(c) . The Court then closed the record . Discussion In general, the Commissioner's determinations set forth in a notice of deficiency are presumed correct, and the taxpayer bears the burden of showing that the determinations are in error . Rule 142(a) ; Welch v . Helvering , 290 U .S . 111, 115 (1933) . Pursuant to section 7491(a), the burden of proof as to factual matters shifts to the Commissioner under certain circumstances . We decide this case without regard to the burden of proof . n - 4 - Accordingly, we need not decide whether section 7491(a) applies in this case . ' Section 72(t)(1) imposes an additional tax on an early distribution from a qualified retirement plan equal to 10 percent of the portion of the amount which is includable in gross income . A qualified retirement plan includes a section 401(k) plan . See secs . 401(a), (k)(1), 4974(c)(1) . Petitioners do not dispute that the unpaid balance of the loan from the section 401(k) plan was an early distribution which was includable in gross income . The 10-percent additional tax does not apply to certain distributions, including distributions : (1) To an employee age 59-1/2 or older ; (2) on account of the employee's disability ; (3) as part of a series of substantially equal periodic payments made for life ; (4) to an employee after separation from service after attainment of age 55 ; (5) to an employee for medical care ; or (6) to an alternate payee pursuant to a qualified domestic relations order . Sec . 72 (t) (2 ) Petitioners do not argue that they satisfy any of the enumerated exceptions under section 72(t)(2) . Instead, petitioners contend that the additional tax should not appl y ' Pursuant to sec . 7491(c), the Commissioner bears the ,burden of production with respect to any penalty, addition t o tax, or additional amount . Even if the $2,338 additional tax under sec . 72(t) is an "additional amount" for which respondent bears the burden of production, respondent has met such burden by showing that petitioner received the distribution when he was 53 years old . See Milner v . Commissioner , T .C . Memo . 2004-111 n .2 . - 5 - because of financial hardship . We have held, however, that general financial hardship is not an exception to the additional tax . Milner v . Commissioner , T .C . Memo . 2004-111 . In the alternative, petitioners argue that any errors on their return are attributable to the TurboTax program . Thus, petitioners contend, they should not be liable for the additional tax . We disagree . Even if the TurboTax program was at fault, a poorly prepared return "is simply no reason to reliev e [taxpayers] of taxes which were legally owing and which would have been paid upon the filing of their * * * return if their return had been correctly calculated ." See Kelly v . Commissioner , T .C . Memo . 1983-156 . We sustain respondent's determination that the $23,378 distribution from Boeing is subject to the 10-percent additional tax under section 72(t) . Because respondent has granted Ms . Zamanizadeh relief under section 6015(c), petitioner shall be solely liable for the deficiency . Reviewed and adopted as the report of the Small Tax Case Division . To reflect the foregoing, An appropriate decisio n will be entered . UNITED STATES TAX COURT WASHINGTON, D.C. 20217-0002 IIIII IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII I 7004 1160 0000 9602 408 2 OFFICIAL BUSINESS PENALTY FOR PRIVATE USE, $300 GHAZ100 NOTIFY 3E __ GHAZ I T EHRAN ,. 2404 SE 1'61aj VANCOWER W , ,~ 56 150« 02 :.1/02/06 EW W ADI► RES S 'API''- 683-55'64 4 ~ }JVsv J r V CERTIFIED MAIL