TAX COURT OPINION

Case: Jon M. Beachey
Docket Number: 20625-23
Judge: Nega
Opinion Type: bench
Filed: 04/01/2025
Pages: 6

JON M. BEACHEY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent United States Tax Court Washington, DC 20217 Docket No. 20625-23. ORDER 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 Joseph W. Nega at Detroit, Michigan, on March 17, 2025, containing his oral findings of fact and opinion rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, an appropriate decision will be entered. (Signed) Joseph W. Nega Judge Served 04/01/25 Bench Opinion by Judge Joseph W. Nega March 17, 2025 3 Jon M. Beachey v. Commissioner of Internal Revenue Docket No. 20625-23 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. The oral findings of fact and opinion are made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Tax Court Rule 152. Rule references in this opinion are to the Tax Court Rules of Practice and Procedure and section references are to Internal Revenue Code in effect at all relevant times. The case was tried in Detroit, Michigan on March 17, 2025. Petitioner Jon Beachey appeared pro se. Stephanie Kingsley appeared on behalf of respondent. By notice of deficiency dated September 25, 2023, respondent determined a deficiency of $6,300 in petitioner's federal income tax for tax year 2021. In the same notice of deficiency, respondent asserted accuracy- related penalties of $960 under section 6662(a) for tax year 2021. After concessions, the sole remaining issue in this case is whether petitioner 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 failed to report a $15,000 retirement account distribution 4 in tax year 2021. On the evidence before us, and using the burden- of-proof principles explained below, the Court finds the following facts: FINDINGS OF FACT/Background Some of the facts and certain exhibits have been stipulated. The parties' stipulated facts are incorporated in this opinion by reference and are found accordingly. Petitioner resided in Michigan at the time he filed the Petition in this case. Petitioner was born 1 2 3 4 5 6 7 8 9 10 11 12 in 1971. 13 14 15 16 17 18 19 20 21 22 23 24 25 Petitioner filed a Form 1040, U.S. Individual Income Tax Return, for taxable year 2021 and did not include a $15,000 distribution that he made from an IRA. Along with the first amended Petition filed with the Court, petitioner attached a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. from Edward Jones. The Form 1099-R from Edward Jones that shows that petitioner received $15,000 distribution from a traditional IRA managed by Edward Jones on May 28, 2021. The same form also shows the petitioner deposited $14,000 into the same IRA on April 12, 2022. According to petitioner, the Edward Jones retirement account was funded via rollover from a 401(k) 5 from a previous employer and petitioner was under the impression that the Edward Jones account was also a 401(k). The documents submitted by petitioner confirm the account was an IRA and not a 401(k). In his first amended Petition and at trial, petitioner characterized the $15,000 distribution on May 28, 2021 as a loan that was repaid on April 12, 2022. Petitioner also explained that he needed the $15,000 at that time to pay for his ex-wife's funeral costs after she unexpectedly passed away. Discussion 1 2 3 4 5 6 7 8 9 10 11 12 13 I. Taxability of Retirement Account Distributions 14 15 16 17 18 19 20 21 22 23 24 25 Generally, respondent's determinations are presumed correct and the taxpayer bears the burden of proving that respondent's determinations are in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Section 61(a) provides that gross income includes all income from whatever source derived. Section 408(d)(1) provides "[e]xcept as otherwise provided in this subsection, any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distribute." Section 408 includes exceptions for rollover distributions, transfers incident to divorce, and distributions for charitable purposes. Sec. 408(d)(3), 6 (6),(8). There is no exception for petitioner's circumstances. See Adams v. Commissioner, T.C. Memo. 2015-162 at *8 ("There is no exception for distributions used to defray ordinary living expenses following the loss of a job or other misfortune.") In fact, there is no exception whatsoever for loans taken from IRAs. Patrick v. Commissioner, T.C. Memo. 1998-30 n.8, aff'd without published op., 181 F.3d 103 (6th Cir. 1999). If such a loan were made, the IRA will lose its exemption and all assets would be deemed distributed. Id.; Sec. 408(e)(1) and (2). The nearest exception that might apply to similar circumstances is the rollover exception. This exception does nothing for petitioner on these facts because a valid rollover must be complete within fewer than 60 days between distribution and deposit but petitioner took significantly more than 180 days between the May 28, 2021, distribution and the April 22, 2022, deposit. Sec. 408(d)(3)(A). Petitioner contends that it would be inequitable to tax him on a distribution taken under such tragic circumstances. The Code affords us no discretion to take this argument into account. The $15,000 retirement account distribution is 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 fulling includible in petitioner's gross income for 2021. 7 II. Section 72(t) Additional Tax on Early Distribution When a taxpayer receives a distribution from a qualified retirement plan before age 59-1/2, section 72(t)(1) generally provides that his tax shall increase "by an amount equal to 10 percent of the portion of such amount which is includible in gross income." Because petitioner was born in 1971, petitioner was not yet age 59-1/2 at the time of the distribution and does not meet any other exception to section 72(t). Accordingly, the additional tax under section 72(t) applies in this case. 1 2 3 4 5 6 7 8 9 10 11 12 13 III. Conclusion This concludes the Court's oral findings of fact and opinion in this case. We have considered all arguments made by the parties, and to the extent not mentioned above, we conclude that they are moot, irrelevant, or without merit. The reflect the foregoing, an appropriate decision will be entered. (Whereupon, at 1:52 p.m., the above-entitled matter was concluded.) 14 15 16 17 18 19 20 21 22 23 24 25