TAX COURT OPINION

Case: Guy Anthony Sperk
Docket Number: 29423-13S
Judge: Guy
Opinion Type: bench
Filed: 10/17/2014
Pages: 6

RMM UNITED STATES TAX COURT WASHINGTON, DC 20217 GUY ANTHONY SPERK, Petitioner, v. ) ) ) ) Docket No. 29423-13S. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) 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 abovecaptioned case before Special Trial Judge Daniel A. Guy, Jr., at Cleveland, Ohio, on September 17, 2014, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral fimdings of fact and opinion, an appropriate decision will be entered. (Signed) Daniel A. Guy, Jr. Special Trial Judge Dated: Washington, D.C. October 17, 2014 SERVED Oct 20 2014 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Bench Opinion by Judge Daniel A. Guy, Jr. September 17, 2014 Guy Anthony Sperk v. Commissioner Docket No. 29423-13S 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 proceeding for the redetermination of a deficiency is a small tax case conducted pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 and 174 of the Tax Court Rules of Practice and Procedure. 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. 20 Hereinafter in this bench opinion, section references 21 22 23 24 25 are to the Internal Revenue Code of 1986, as amended, in effect for 2011, and Rule references are to the Tax Court Rules of Practice and Procedure. Respondent issued a notice of deficiency to petitioner for 2011 determining that he is liable for 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 10 11 12 a tax deficiency of $1,399 in respect of a distribution of $5,289 that he received from a retirement account that he maintained at Fidelity Investments (Fidelity). Petitioner timely filed a petition for redetermination with the Court pursuant to section 6213(a). He resided in Ohio at the time the petition was filed. Petitioner appeared at trial pro se. Emly B. Berndt appeared on behalf of respondent. Respondent concedes that petitioner is not liable for the 10% additional tax imposed under section 72(t) in respect of the distribution from 13 Fidelity. The sole issue remaining for decision is 14 15 16 17 18 19 20 21 whether petitioner is liable for Federal income tax in respect of the distribution. Between 2007 and 2011, Mr. Sperk suffered several heart attacks and strokes. During 2011, he was employed as an aircraft mechanic for part of the year, but underwent heart surgery and was unable to work for several months. Needing funds to pay for his medical care and other expenses, he contacted 22 Fidelity and was informed that, due to his medical 23 24 25 emergency, he would be able to withdraw funds from his retirement account "tax-free". Relying on that advice, Mr. Sperk requested a distribution of $5,289 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 5 1 2 3 4 from his Fidelity account. Fidelity withheld tax equal to 10% of the requested distribution and distributed the balance to Mr. Sperk. Fidelity issued to Mr. Sperk a Form 1099-R, 5 Distributions From Pensions, Annuities, Retirement or 6 Profit-Sharing Plans, IRAs, Insurance Contracts, 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 etc., .reporting that the $5,289 distribution was subject to Federal income tax. When he prepared his Federal income tax return for 2011, however, Mr. Sperk did not include the distribution in taxable income. Mr. Sperk testified at trial that he is supporting himself, his aging parents, and his brother on a limited salary, and that he simply cannot afford to pay the tax due,h'e also testified 601 e.cl (c.ca. \ that his daical condition may limit his ability to work in the future. The Commissioner's determination of a taxpayer's liability in a notice of deficiency normally is presumed correct, and the taxpayer bears the burden of proving that the determination is incorrect. Rule 142(a); Welch v Helvering, 290 0.S. 111, 115 (1933). Section 61(a) provides that gross income 25 means "all income from whatever source derived". 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 Pensions and retirement allowances constitute gross income unless excluded by law. Sec. 61(a)(11); sec. 1.61-11(a), Income Tax Regs. Distributions from a qualified retirement plan, such as petitioner's section 401(k) plan account with Fidelity, normally constitute gross income subject to Federal income tax in the year of the distribution. See secs. 61(a), (b), 72(a)(1), 402(a), 408(d)(1); see also Arnold v Commissioner, 111 T.C. 250, 253 (1998). Although Mr. Sperk does not dispute the proposition that the distribution he received is subject to income tax, he asks the Court to consider his medical condition and financial difficulties, and relieve him of the tax due. Although the Court is sympathetic to Mr. Sperk's position, we must apply the law as written. He has not pointed to a hardship exception to the imposition of Federal income tax under the circumstances presented, and the Court is not aware of an exception. We note that respondent has conceded that Mr. Sperk used the funds to pay medical expenses and is entitled to the exception pf'the 10% additional tax prescribed in section 72(t)(2)(B). This exception does not extend, however, beyond the provisions of section 72(t). 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.Capita1ReportingCompany.com Capital Reporting Company 1 2 3 On this record, we sustain respondent's determination that Mr. Sperk is liable for Federal income tax in respect of the distribution in dispute. 4 Consistent with the foregoing, and taking into 7 account respondent's concession, an appropriate decision will be entered. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 1:55 p.m., the above- entitled matter was concluded. ) 5 6 7 8 9 10 11 12 13 14 15 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com