                  T.C. Summary Opinion 2008-53



                      UNITED STATES TAX COURT



  JESSE WILLIAMS, JR. AND GWENDOLYN F. WILLIAMS, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2423-07S.               Filed May 19, 2008.



     Jesse Williams, Jr., and Gwendolyn F. Williams, pro sese.

     Susan M. Fenner, for respondent.



     GERBER, Judge:   This case was heard pursuant to the

provisions of section 74631 of the Internal Revenue Code in

effect when the petition was filed.   Pursuant to section 7463(b),

the decision to be entered is not reviewable by any other court,

and this opinion shall not be treated as precedent for any other


     1
       Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for 2004,
the taxable year in issue.
                                 - 2 -

case.    With respect to petitioners’ 2004 tax year, respondent

determined a $729 deficiency solely attributable to the 10-

percent additional tax of section 72(t) on an early withdrawal

from a qualified retirement plan.    We consider whether

respondent’s determination was in error.

                           Background

     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 2004 return

petitioners also reported a $16,177 deduction for medical

expenses.

     Mr. Williams, being aware of the 10-percent tax on early2

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


     2
       In the context of this case “early” means before the date
petitioner turned 59½.
                                - 3 -

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 medical expenses, the 10-

percent additional tax applied and resulted in a $729 deficiency

determination.

                           Discussion

     Section 72(t)(1) provides for an additional tax of 10

percent on withdrawals from qualified retirement plans.      Section

72(t)(2) provides for several exemptions from the additional tax.

The following two exceptions are relevant:

          (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
     section 213 to the employee for amounts paid during the
     taxable year for medical care * * * .
                               - 4 -

Respondent agrees that petitioners are entitled to the medical

expense exception of section 72(t)(2)(B) but contends that Mr.

Williams’s withdrawal does not fall within the age 55 exception

of section 72(t)(2)(A)(v).   Respondent interprets the phrase

“made to an employee after separation from service after

attainment of age 55” as meaning that the employee must have

separated from employment after becoming 55.   Conversely,

petitioners interpret the phrase as meaning that so long as a

participant has attained age 55 and is separated, the participant

meets the exception from the additional 10-percent tax for early

withdrawal.

     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. * * *

H. Conf. Rept. 99-841 (Vol. II), at II-456 to II-457 (1986),

1986-3 C.B. (Vol. 4) 1, 456-457.   On the basis of that

explanation, any possible ambiguity in section 72(t)(2)(A)(v)

would be resolved.

     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
                                 - 5 -

had other options to avoid it.     Unfortunately, there is no

reasonable cause exception applicable to the imposition of the

section 72(t) 10-percent additional tax.       In addition the

statute does not provide the Secretary with discretion to waive

the additional tax.

     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,


                                         Decision will be entered

                                 for respondent.




     3
       Even respondent in his brief expressed sympathy for
petitioners’ plight but explained that there was no statutory
remedy for this type of situation.
