expenses for the taxpayer or the taxpayer’s spouse to the extent such distributions do not exceed the taxpayer’s qualified higher education expenses for the taxable year, sec. 72(t)(2)(E), (7). A. Health Insurance Premiums A distribution qualifies under section 72(t)(2)(D) if it was made from an individual retirement plan to an individual after separation from employment: (1) If such individual has received unemployment compensation for 12 consecutive weeks under any Federal or State unemployment compensation law by reason of such separation, sec. 72(t)(2)(D)(i)(I); (2) if such distribution was made during any taxable year during which such unemployment compensation is paid or the succeeding taxable year, sec. 72(t)(2)(D)(i)(II); and (3) to the extent such distribution does not exceed the amount paid during the taxable year for insurance, sec. 72(t)(2)(D)(i)(III). A self-employed individual shall be treated as having satisfied the requirement of section 72(t)(2)(D)(i)(I) if, under Federal or State law, the individual would have received unemployment compensation but for the fact that the individual was self-employed. Sec. 72(t)(2)(D)(iii). Respondent does not dispute that petitioners incurred health insurance expenses of $1,800. Respondent contends, however, that the exception under section 72(t)(2)(D) does not apply because Mr. El-Bibany does not satisfy the statutory requirements. We agree.
Congress, however, has imposed limitations on the amount of room and board expenses that qualify for favorable tax treatment. However unfair this statute might seem to petitioners, the Court is bound to apply the law as written. See Estate of Cowser v. Commissioner , 736 F.2d 1168, 1171-1174 (7th Cir. 1984), affg. 80 T.C. 783 (1983). Accordingly, we conclude that petitioners are entitled to qualified higher education expenses for room and board of $2,500.
With regard to transportation expenses, respondent, at trial and in his trial memorandum, conceded that Mrs. Kandil’s qualified higher education expenses included transportation costs up to the amount allowed as determined by SJSU. On brief, however, respondent argues that the concession was in error. In essence, respondent now contends that petitioners are not entitled to an allowance for transportation expenses because such expenses do not qualify as higher education expenses under section 529(e)(3)(A).
Respondent’s change in position raises the issue of equitable estoppel against respondent. “Equitable estoppel is a judicial doctrine that ‘precludes a party from denying his own acts or representations which induced another to act to his detriment.’” Hofstetter v. Commissioner , 98 T.C. 695, 700 (1992)
(quoting Graff v. Commissioner , 74 T.C. 743, 761 (1980), affd.
673 F.2d 784 (5th Cir. 1982)). It is well settled, however, that equitable estoppel does not bar or prevent respondent from correcting a mistake of law, even where a taxpayer may have relied to his detriment on that mistake. Dixon v. United States , 381 U.S. 68, 72-73 (1965); Auto. Club of Mich. v. Commissioner , 353 U.S. 180, 183 (1957); see also Schuster v. Commissioner , 312 F.2d 311, 317 (9th Cir. 1962), affg. in part and revg. in part 32 T.C. 998 (1959); Zuanich v. Commissioner , 77 T.C. 428, 432-433 (1981). An exception exists only in the rare case where a taxpayer can prove he or she would suffer an unconscionable injury because of that reliance. Manocchio v. Commissioner , 78 T.C. 989, 1001 (1982), affd. 710 F.2d 1400 (9th Cir. 1983). Moreover, equitable estoppel is applied “against the Government with utmost caution and restraint”. Schuster v. Commissioner , supra at 317.
Section 1.221-1(e)(2)(i), Income Tax Regs., defines qualified higher education expenses as the “cost of attendance (as defined in section 472 of the Higher Education Act of 1965, 20 U.S.C. 1087ll, as in effect on August 4, 1997)” and further states that consistent with 20 U.S.C. sec. 1087ll (Supp. IV 1998) the cost of attendance includes an allowance for transportation.15 For purposes of section 72(t)(2)(E), however, section 529(e)(3) defines qualified higher education expenses as tuition, fees, books, supplies, equipment, and room and board. Clearly, transportation expenses are not included within this definition. With regard to the definition of qualified higher education expenses under section 529(e)(3)(B)(ii), the term “cost of attendance” is applicable only in the context of determining the minimum allowance for room and board expenses. On brief, respondent admitted that respondent’s position was misguided by section 1.221-1(e)(2)(i), Income Tax Regs. Thus, respondent’s misconceived concession was an erroneous representation of law. As such, equitable estoppel does not bar respondent from changing respondent’s position to correct a mistake of law unless petitioners would suffer an unconscionable injury because of their reliance on respondent’s concession at trial. Although petitioners did not file a brief in response, the record in its entirety fails to demonstrate that petitioners suffered an unconscionable injury because of their reliance on respondent’s misrepresentation. Accordingly, we conclude that Mrs. Kandil’s transportation expenses do not constitute qualified higher education expenses for purposes of section 72(t)(2)(E). Conclusion We have considered all of the other arguments made by petitioners, and, to the extent that we have not specifically addressed those arguments, we conclude that they are without merit.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect our disposition of the disputed issue, as well as respondent’s concession, Decision will be entered under Rule 155.