PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b), THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE.
GERBER,
Petitioners resided in Texas at the time their petition was filed. They timely filed a joint 2004 return of income. Petitioner Jesse Williams retired from his job at 53 years of age, and during 2004, when he was 55, he withdrew $ 23,500 from his qualified retirement plan. Petitioners included the $ 23,500 in income and paid tax on that amount. On their 2008 Tax Ct. Summary LEXIS 54">*55 2004 return petitioners also reported a $ 16,177 deduction for medical expenses.
Mr. Williams, being aware of the 10-percent tax on early 2 withdrawal, reviewed the statutory exceptions to the additional 10-percent tax. His review resulted in his belief that two exceptions applied. He thought that the medical expense and distribution after age 55 exceptions applied to his situation. He computed the amount of withholding tax he had paid and figured that a $ 23,500 withdrawal from his qualified retirement plan would result in no tax in excess of the withholding tax or a small refund. Accordingly, he relied on his interpretation of the "age 55 exception" rather than the medical exception. If he had relied on the medical exception and withdrawn $ 16,177 from his retirement plan, there would not have been a 10-percent additional tax determined against petitioners and they would have received a larger refund based on the amount of available withholding tax.
Respondent determined that the age 55 exception was not applicable, but that the medical exception did apply. Because the $ 23,500 withdrawal exceeded the 2008 Tax Ct. Summary LEXIS 54">*56 medical expenses, the 10percent additional tax applied and resulted in a $ 729 deficiency determination.
(A) In general. -- Distributions which are -- * * * * (v) made to an employee after separation from service after attainment of age 55, * * * * (B) Medical expenses. -- Distributions made to the employee * * * to the extent such distributions do not exceed the amount allowable as a deduction under
Respondent directs our attention to the following legislative history underlying the age 55 exception: In all cases, the exception applies only if the participant has attained age 55 on or before separation from service. Thus, for example, the exception does not apply to a participant who separates from service at age 52, and, pursuant to the early retirement provisions of the plan, begins receiving benefits at or after age 55. * * *
Petitioners contend that their interpretation of the subject statute was a reasonable one and in these circumstances, it is unfair to subject them to additional tax, especially because they had other options to avoid it. Unfortunately, there is no reasonable cause exception applicable to the imposition of the
The Court, in reading petitioners' documents and hearing their explanations and testimony, recognizes that petitioners are thoughtful and intelligent. In spite of their intelligence, in their attempt to be good citizens and to pay their rightful share of tax they were tripped up by the complexity and the sometimes ambiguous nature of the tax law. We are truly sympathetic to petitioners' situation and commend them for their forthright attempt to be good citizens. 3 Unfortunately, we are without authority to change the result in this case. To reflect the foregoing,
1. Unless otherwise indicated, all subsequent section references are to the Internal Revenue Code in effect for 2004, the taxable year in issue.↩
2. In the context of this case "early" means before the date petitioner turned 59 1/2.↩
3. Even respondent in his brief expressed sympathy for petitioners' plight but explained that there was no statutory remedy for this type of situation.↩
