                             T.C. Summary Opinion 2016-40



                         UNITED STATES TAX COURT



                     PAUL PARISI, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 26257-13S.                          Filed August 9, 2016.



      Paul Parisi, pro se.

      Lauren B. Epstein and Randall B. Childs, for respondent.



                                SUMMARY OPINION


      VASQUEZ, Judge: This case was heard pursuant to the provisions of

section 7463 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 case.

Unless otherwise indicated, all section references are to the Internal Revenue Code
                                          -2-

in effect for the year in issue, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

      Respondent determined a $2,796 deficiency1 in petitioner’s 2011 Federal

income tax. The issues for decision are: (1) whether a 2011 withdrawal of

$15,000 from petitioner’s individual retirement account was a taxable distribution,

and if so, (2) whether petitioner is liable for the 10% additional tax on the

distribution under section 72(t).

                                     Background

      Some of the facts have been stipulated and are so found. The stipulation of

facts and the attached exhibits are incorporated herein by reference. Petitioner

resided in California at the time he filed the petition.

      Petitioner, a high school teacher, was laid off from his job in Barstow,

California, at the end of the 2009 school year. He remained unemployed until

sometime in 2011. In 2011 petitioner, who was 50 years old at the time of trial,




      1
         Respondent adjusted petitioner’s miscellaneous itemized deductions
because after adjustments to petitioner’s gross income, the aggregate amount of
those deductions did not exceed the 2% floor of sec. 67(a). The adjustment to
petitioner’s miscellaneous itemized deductions is a computational matter, the
resolution of which depends on our disposition of the two disputed issues
identified above.
                                         -3-

withdrew $15,000 from an individual retirement account (IRA) he had with

Charles Schwab & Co., Inc. (Charles Schwab).

      In 2011 Petitioner started pursuing certifications in software programs

offered by Adobe Systems, Inc. (Adobe). That year he took two online exams

called “Visual Communication using Adobe Photoshop CS5” offered by a

company called Certiport, neither of which he passed. In 2012 he passed this

exam and received a certificate recognizing him as an Adobe certified associate in

visual communication using Adobe Photoshop CS5. Petitioner also took various

online computer training courses at Valencia College and Piedmont Community

College in 2012 and 2013. The skills petitioner developed through his online

education helped him obtain a teaching position in Florida, where he was

employed at the time of trial.

      Charles Schwab issued petitioner a Form 1099-R, Distributions From

Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance

Contracts, etc., for 2011. The Form 1099-R reported that he had received a

$15,000 distribution from his IRA. Petitioner timely filed his 2011 income tax

return but did not report the distribution.
                                        -4-

                                     Discussion

I.    Burden of Proof

      Generally, the Commissioner’s determinations in a notice of deficiency are

presumed correct, and the taxpayer bears the burden of proving that the

determinations are erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111,

115 (1933). The burden of proof shifts to the Commissioner, however, if the

taxpayer produces credible evidence to support the deduction or position, the

taxpayer complied with the substantiation requirements, and the taxpayer

cooperated with the Secretary2 with regard to all reasonable requests for

information. Sec. 7491(a); see also Higbee v. Commissioner, 116 T.C. 438, 440-

441 (2001).

      Petitioner does not contend that section 7491(a)(1) should shift the burden

here, and the record establishes that he did not satisfy the section 7491(a)(2)




      2
         The term “Secretary” means “the Secretary of the Treasury or his
delegate”, sec. 7701(a)(11)(B), and the term “or his delegate” means “any officer,
employee, or agency of the Treasury Department duly authorized by the Secretary
of the Treasury directly, or indirectly by one or more redelegations of authority, to
perform the function mentioned or described in the context”, sec.
7701(a)(12)(A)(i).
                                         -5-

requirements.3 Consequently, petitioner bears the burden of proof as to any

disputed factual issue. See Rule 142(a).

      Under section 6201(d), if a taxpayer asserts a reasonable dispute with

respect to an item of income reported on an information return filed by a third

party and the taxpayer meets certain other requirements, the Commissioner bears

the burden of producing reasonable and probative evidence, in addition to the

information return, concerning the deficiency attributable to the income item.

Petitioner has not raised any reasonable dispute with respect to the accuracy of the

information return. Consequently, the burden of production with respect to the

income did not shift to respondent under section 6201(d).

II.   IRA Distribution Includible in Gross Income

      We first address whether the IRA distribution is includible in petitioner’s

gross income for the 2011 tax year. Respondent argues that petitioner failed to

establish that any portion of the distribution is nontaxable.

      Subject to certain exceptions, amounts distributed from an IRA are

includible in a taxpayer’s gross income as provided in section 72. Sec. 408(d)(1).

Petitioner, who admits to receiving the IRA distribution in 2011, has neither


      3
         At trial we ordered both parties to file posttrial opening briefs. Petitioner
failed to do so.
                                          -6-

argued nor established that an exception applies. Accordingly, the distribution is

includible in the calculation of petitioner’s taxable income.

III.   Section 72(t) Additional Tax

       We now address whether petitioner is liable for the 10% additional tax on

the IRA distribution imposed by section 72(t). Petitioner, who was 50 years old at

the time of trial, argues that the exception for qualified higher education expenses

under section 72(t)(2)(E) applies to him. Respondent argues that petitioner failed

to establish that he had qualified higher education expenses for 2011. For the

reasons set forth below, we agree with respondent.

       Section 72(t)(1) imposes a 10% additional tax on the taxable amount of an

early distribution from a qualified retirement plan (as defined in section 4974(c)).4

A distribution is early if made to an employee who has not attained age 59-1/2.

Sec. 72(t)(2)(A)(i). Among other exceptions not here relevant, a taxpayer may be

able to reduce the amount of an early distribution from an IRA that is subject to

the 10% additional tax by the amount of a taxpayer’s qualified higher education

expenses paid in the year of the early distribution.5 Sec. 72(t)(2)(E). Qualified

       4
        The term “qualified retirement plan” includes an individual retirement
account described in sec. 408(a). Sec. 4974(c)(4).
       5
           The sec. 72(t)(2)(E) higher education exception applies only to qualified
                                                                        (continued...)
                                         -7-

higher education expenses paid in a year other than the year of an early IRA

distribution do not reduce the amount of the early distribution subject to the 10%

additional tax. See id.; Lodder-Beckert v. Commissioner, T.C. Memo. 2005-162.

      In general, “qualified higher education expenses” means qualified higher

education expenses (as defined in section 529(e)(3)) for education furnished to the

taxpayer, the taxpayer’s spouse, or any child of the taxpayer or the taxpayer’s

spouse, at an eligible educational institution. Sec. 72(t)(7). These include tuition,

fees, books, supplies, and equipment. Sec. 529(e)(3)(A)(i). In the case of an

individual who is an eligible student (as defined in section 25A(b)(3)) for any

academic period, the term also includes reasonable costs for the period (as

determined under the qualified tuition program) for room and board while

attending an eligible educational institution. Sec. 529(e)(3)(B)(i). In general, the

term “eligible student” means, with respect to any academic period, a student who

is enrolled at least half time in a degree or certificate program at an eligible

institution of higher education. See secs. 529(e)(3)(B)(i), 25A(b)(3); 20 U.S.C.

sec. 1091(a)(1) (2006).




      5
         (...continued)
plans that meet the sec. 7701(a)(37) definition of an individual retirement plan,
i.e., individual retirement accounts and individual retirement annuities.
                                         -8-

      Petitioner argues that he had qualified higher education expenses because he

was pursuing Adobe certifications in 2011. However, petitioner failed to

introduce any evidence that he was actually enrolled in an eligible educational

institution in 2011. While petitioner took two online Adobe certification exams

that year, he offered no testimony or other evidence specifying what courses he

took, if any, to prepare for these exams. Furthermore, with the exception of a

printout from Certiport’s Web site showing that an “Adobe Certified Associate

Exam Voucher” costs $95,6 petitioner neither specified nor substantiated

education-related expenses for tuition, fees, supplies, or equipment for 2011.7

      At trial petitioner suggested that his rent payments constitute qualified

higher education expenses. However, since nothing in the record indicates that

petitioner was enrolled at least half time in an eligible educational institution in

2011, we cannot conclude that he was an “eligible student” under sections




      6
        This undated document is of no help to petitioner given the absence of
evidence that he was enrolled in any courses in 2011.
      7
         In contrast, petitioner was able to produce numerous documents
evidencing that he took technology courses offered by Valencia College and
Piedmont Community College in 2012 and 2013. Even if petitioner had specified
the amounts of his expenses pertaining to this coursework (which he did not),
those expenses would not reduce the amount of the early distribution subject to the
sec. 72(t) additional tax because they were not incurred in 2011.
                                        -9-

529(e)(3)(B)(i) and 25A(b)(3).8 Consequently, petitioner’s 2011 rent payments do

not constitute “room and board” under section 529(e)(3)(B)(i).

      Accordingly, we hold that petitioner did not have qualified higher education

expenses under section 72(t)(2)(E). In reaching our holdings herein, we have

considered all arguments made, and to the extent not mentioned above, we find

them to be moot, irrelevant, or without merit.

      To reflect the foregoing,


                                                    Decision will be entered for

                                              respondent.




      8
         Because petitioner failed to substantiate any expenses for education for
2011, we need not decide whether Adobe’s online certification training program
constitutes an “eligible educational institution” under secs. 72(t)(7) and 529(e)(5).
