Alphonse M. & Doris Esposito v. Commissioner, T.C. Summary Opinion 2004-88

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U.S. Tax Court

Alphonse M. & Doris Esposito v. Commissioner

T.C. Summary Opinion 2004-88 · Docket 13786-03S · Decided Jun 30, 2004 · Powell · T.C. Summary Opinion

individual from an individual retirement plan to the extent such distributions do not exceed the qualified higher education expenses * * * of the taxpayer for the taxable year.” (Emphasis added.) An “individual retirement plan” is defined as: “(A) an individual retirement account described in section 408(a), and (B) an individual retirement annuity described in section 408(b).” Sec. 7701(a)(37) (an individual retirement plan is commonly referred to as an IRA). Section 72(t)(2)(E) was added by section 203(a) of the Taxpayer Relief Act of 1997, Pub. L. 105-34, 111 Stat. 788, 809. The Report of the Committee on the Budget refers only to withdrawals from IRAs. See H. Rept. 105148, at 288-289 (1997), 1997-4 C.B. (Vol. 1) 319, 610-611. It is undisputed that the retirement plan from which petitioner withdrew the $100,000 is a plan described in section 401(k), and, therefore, the exception contained in section 71(t)(2)(E) does not apply.

Petitioner relies on his interpretation of the instructions to the 1998 Form 1040, U.S. Individual Income Tax Return, to establish that section 71(t)(2)(E) is applicable. The differences between a “qualified retirement plan” and an “individual retirement plan” may be subtle. Nonetheless, they do exist, and the authoritative sources of Federal tax law are the statutes, regulations, and case law. Green v. Commissioner , 59 T.C. 456, 458 (1972). The statutory framework is clear that section 72(t)(2)(E) does not apply, and respondent is sustained. Reviewed and adopted as the report of the Small Tax Case Division.

To reflect the foregoing, Decision will be entered for respondent.

Footnotes

¹ 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.

² In 1998, petitioner Alphonse M. Esposito (petitioner) withdrew $100,000 from his retirement plan to pay the higher education expenses for four of his children. In preparing their 1998 Federal income tax return, petitioners included the $100,000 distribution but did not report the additional tax for an early distribution under section 72(t). In the notice of deficiency, respondent determined petitioners were liable for the additional tax. Section 72(t)(1) imposes an additional tax of 10 percent of the taxable amount received from a “qualified retirement plan (as defined in section 4974(c))”. Petitioner maintains that the additional tax does not apply because the distribution qualifies under section 72(t)(2)(E). Section 72(t)(2)(E) provides that the additional tax on early distributions does not apply to “distributions to an

Sections addressed

I.R.C. § 72 Annuities; certain proceeds of endowment and life…
(t) (t)(1) (t)(2)(E)