COUPLE WITHDRAWS FUNDS FROM WRONG IRA, IS SUBJECT TO ADDITIONAL TAX ON EARLIER DISTRIBUTIONS.

Frank W. Louis, for respondent.

[1] WHERRY, Judge: This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect at the time the petition was filed.¹ The decision to be entered is not reviewable by any other court, and this opinion should not be cited as authority.

[2] Respondent determined a Federal income tax deficiency for petitioners' 1999 taxable year in the amount of $2,000. The sole issue for decision is whether petitioners are liable for the 10- percent additional tax under section 72(t) for a withdrawal of $20,000 on or about May 20, 1999, from an individual retirement account (IRA) in the name of Ann E. Owens.

[4] Petitioners Howard T. Owens, Jr., and Ann E. Owens, husband and wife, were born on July 20, 1934, and March 29, 1941, respectively. In 1999, petitioners owned multiple IRA accounts, including a Fidelity Investments Traditional IRA in the name of Howard T. Owens, Jr., and a Fidelity Investments Traditional IRA in the name of Ann E. Owens. As of early May 1999, the balance of the Howard T. Owens, Jr., account was in excess of $195,000 and that of the Ann E. Owens account was in excess of $85,000.

[5] On or about May 20, 1999, a withdrawal in the amount of $20,000 was made from the Ann E. Owens IRA. At this time, Ann E. Owens was 58 years of age. The withdrawal was indicated on the quarterly investment reports sent to Ann E. Owens on or about June 10, 1999, and September 9, 1999.

[6] Petitioners filed a joint Form 1040, U. S. Individual Income Tax Return, for 1999. On their return they included $20,049 as a taxable pension distribution, based on the foregoing May 20th withdrawal, but they did not report the 10-percent additional tax attributable to a premature IRA withdrawal. On August 22, 2001, respondent issued to petitioners a notice of deficiency determining that they were liable for this additional tax in the amount of $2,000.

[7] In general, section 408 governs the treatment of IRAs. Specifically, section 408(d) provides that distributions from an IRA are taxable in the manner directed in section 72 unless properly rolled over within 60 days into another IRA or eligible retirement plan. Section 72 typically operates to include distributions in gross income, and subsection (t) provides for an additional tax on premature distributions, reading as follows in relevant part:

II. Contentions of the Parties

[8] It is respondent's position that petitioners' IRA distribution falls within the terms specified in section 72(t)(1) for imposition of the 10-percent additional tax and that none of the exceptions enumerated in paragraph (2) apply on these facts. Petitioners concede that the $20,000 was withdrawn from the IRA of Ann E. Owens at a time she was only 58 years old and that the amount was not rolled over into another retirement account or plan. Additionally, petitioners have at no time contended that any of the exceptions set forth in section 72(t)(2) are applicable in their circumstances. Nonetheless, petitioners apparently believe that they should be relieved of the 10-percent additional tax on grounds of equity or fairness.

[9] Howard T. Owens, Jr., provided the following testimony at trial:

[10] The Court concurs with petitioners' contentions that there was little reason to withdraw funds from the IRA of Ann E. Owens and incur an unnecessary 10-percent tax under section 72(t) when the funds could have been withdrawn from Howard T. Owens, Jr.'s IRA without imposition of the additional tax. Nevertheless, the Tax Court is a court of limited jurisdiction and lacks general equitable powers. Commissioner v. McCoy, 484 U. S. 3,7 (1987); Hays Corp. v. Commissioner, 40 T.C. 436, 442-443 (1963), affd. 331 F.2d 422 (7th Cir. 1964). Consequently, our jurisdiction to grant equitable relief is limited. Woods v. Commissioner, 92 T.C. 776, 784-787 (1989); Estate of Rosenberg v. Commissioner, 73 T.C. 1014, 1017-1018 (1980). This Court has no authority to disregard the express provisions of statutes adopted by Congress, even where the result in a particular case, such as the instant proceeding, seems harsh. Estate of Cowser v. Commissioner, 736 F.2d 1168, 1171, 1174 (7th Cir. 1984), affg. 80 T.C. 783 (1983).

[11] With respect to section 72(t) in particular, this Court has repeatedly ruled that it is bound by the list of statutory exceptions enumerated in section 72(t)(2). See, e. g., Arnold v. Commissioner, 111 T.C. 250, 255 (1998); Schoof v. Commissioner, 110 T.C. 1, 11 (1998); Clark v. Commissioner, 101 T.C. 215, 224-225 (1993); Swihart v. Commissioner, T.C. Memo. 1998-407; Pulliam v. Commissioner, T.C. Memo. 1996-354; Roundy v. Commissioner, T.C. Memo. 1995-298, affd. 122 F.3d 835 (9th Cir. 1997). The explicit and detailed inclusion of specific exceptions as part of the statutory scheme itself suggests that other liberties should not be indiscriminately inserted through the judicial process. Cf. Larotonda v. Commissioner, 89 T.C. 287 (1987) (interpreting former section 72(m)(5), a penalty provision without the list now contained in section 72(t)(2), and largely limited to its facts by our subsequent holding in Aronson v. Commissioner, 98 T.C. 283 (1992)).

[12] This impression is further buttressed by legislative history. The 10-percent additional tax provision designated section 72(t) was enacted as part of the Tax Reform Act of 1986, Pub. L. 99- 514, sec. 1123, 100 Stat. 2472. Committee reports accompanying the statute's passage reflect that the exceptions given were a deliberate and considered part of the development of section 72(t). See H. Rept. 99-426, at 727-731 (1985), 1986-3 C.B. (Vol. 2) 1, 727-731; S. Rept. 99-313, at 611-617 (1986), 1986-3 C.B. (Vol. 3) 1, 611-617; H. Conf. Rept. 99-841, at II-452 to II-458 (1986), 1986-3 C.B. (Vol. 4) 1, 452-458. Also, any over-broadening of the grounds for exception could thwart the purpose identified in the legislative history for the additional tax, to wit:

[14] However, neither the foregoing legislative changes nor their underlying history aids petitioners here. Critically, the statutory amendments are effective only with respect to distributions made after December 31, 2001. Economic Growth and Tax Relief Reconciliation Act of 2001, sec. 644(c), 115 Stat. 123. Moreover, even if applicable, the provisions do not speak to this Court's authority to waive the additional tax on premature withdrawals. No similar amendments were made to the list of exceptions in section 72(t)(2).

[15] Second, petitioners direct our attention to Doing v. Commissioner, 58 T.C. 115 (1972). In that case, the taxpayer sought in 1966 to transfer his assets from one retirement plan to another. Id. at 119-120. He requested in writing that the custodian of the first plan liquidate his investments and forward the proceeds directly to the custodian for the new plan. Id. at 120. Thereafter, the custodian of the first plan, ignoring the taxpayer's instructions, sent the resultant check to the taxpayer, who promptly endorsed the instrument and had it forwarded to the new custodian. Id. at 121-122. The Court held that the taxpayer was not liable for the penalty on premature distributions under former section 72(m)(5). Id. at 129-131.

[16] Doing v. Commissioner, supra, is alas distinguishable from petitioners' situation. As alluded to previously, cases decided under former section 72(m)(5), which did not contain a detailed list of exceptions comparable to present section 72(t), provide little authority for departure from the current legislative scheme. Additionally, even if the two statutes could be interpreted to afford similar latitude for equitable relief, the equities in petitioners' scenario bear insufficient resemblance to those portrayed in Doing v. Commissioner, supra. The evidence in that case clearly vindicated the taxpayer, showing both faultlessness and vigilance by means of his specific written instructions to the financial institution and his immediate attempts to correct the subsequent error.

[17] Petitioners, in contrast, offered testimony of only a "recollection" of a request that Fidelity withdraw the $20,000 amount from the account of Howard T. Owens, Jr., coupled with an admission of failure or inadvertence "for some reason" to look at the account statement reflecting the distribution. They also never made any prompt and concrete attempt to take remedial action.

[18] In conclusion, although the Court is sympathetic to petitioners' predicament, the circumstances of this case afford no basis upon which petitioners may be relieved of the 10-percent additional tax imposed under section 72(t). The Court holds that petitioners are liable for the additional tax in the amount of $2,000.

[19] To reflect the foregoing,

[20] Decision will be entered for respondent.

²The Court notes that its resolution of this matter turns principally on the legal question of whether it may depart from sec. 72(t)(2), as written. Because the Court's ruling on this issue renders superfluous further facts beyond those stipulated by the parties, no findings are made with respect to the accuracy of additional aspects of Howard T. Owens, Jr.'s recollections. In a similar vein, this case is decided without regard to burden of proof. See sec. 7491; Rule 142.