                  T.C. Summary Opinion 2006-155



                     UNITED STATES TAX COURT



                CHARLES J. OLINTZ, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 763-05S.                  Filed September 25, 2006.


     Charles J. Olintz, pro se.

     Lauren B. Epstein, for respondent.



     COUVILLION, Special Trial Judge:     This case was heard

pursuant to 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.


     1
      Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for the
year in issue, and all Rule references are to the Tax Court Rules
of Practice and Procedure.
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       Respondent determined a deficiency in petitioner’s Federal

income tax for 2002 in the amount of $5,361 and the accuracy-

related penalty under section 6662(a) in the amount of $1,072.

       The principal issue is whether petitioner is liable for the

10-percent additional tax under section 72(t) for an early

distribution from a qualified retirement plan, and whether

petitioner is liable for the penalty under section 6662(a).2

       Some of the facts were stipulated and are incorporated

herein.       At the time the petition was filed, petitioner resided

in Melbourne, Florida.

       Petitioner was an employee of Bell Atlantic for 10 years.

Bell Atlantic, either by merger or other type of corporate

reorganization, became known as Verizon or Verizon

Communications.       During the year 1999, petitioner retired.    At

the time of his retirement, petitioner was 56 years old.

       As an employee, petitioner was a participant in two pension

plans of his employer.       One plan was described as a “Direct

Savings Account Plan”, and the other plan was described as a

“401(k) plan”.       Both plans were qualified plans under section

401.       The issue in this case arises from a withdrawal by


       2
      The notice of deficiency also included an adjustment of $62
in unreported interest income. Petitioner conceded that issue at
trial. Petitioner also reported nonemployee compensation of
$2,354, which he reported as other income on his income tax
return. In the notice of deficiency, respondent determined that
this income was subject to self-employment tax. Petitioner did
not challenge that determination.
                               - 3 -

petitioner of $50,545.27 from the Direct Savings Account Plan

during the year at issue, 2002.   Petitioner included that amount

as income on his 2002 Federal income tax return.    Petitioner,

however, did not include a computation or payment of the

additional tax under section 72(t) for an early distribution from

a qualified retirement plan.   In the notice of deficiency,

respondent determined that the distribution was subject to the

additional tax under section 72(t).

     Section 72(t) imposes a 10-percent additional tax on early

distributions from a qualified retirement plan.    Paragraph (1)

provides in relevant part:


          (1) Imposition of additional tax.–-If any taxpayer
     receives any amount from a qualified retirement plan (as
     defined in section 4974(c)), the taxpayer’s tax under this
     chapter for the taxable year in which such amount is
     received shall be increased by an amount equal to 10 percent
     of the portion of such amount which is includable in gross
     income.


     The 10-percent additional tax, however, does not apply to

certain distributions.   Section 72(t)(2) excepts distributions

from the additional tax if the distributions are made:    (1) To an

employee age 59-1/2 or older; (2) to a beneficiary (or to the

estate of the employee) on or after the death of the employee;

(3) on account of the employee’s disability; (4) as part of a

series of substantially equal periodic payments made for life;

(5) to an employee after separation from service after attainment
                               - 4 -

of age 55; (6) as dividends paid with respect to corporate stock

described in section 404(k); (7) to an employee for medical care;

or (8) to an alternate payee pursuant to a qualified domestic

relations order.

      Petitioner acknowledged at trial that he used the proceeds

of the distribution to pay personal expenses and a substantial

amount was used to pay expenses of his fiancee, who was in a

financial bind.

      The Court agrees with respondent that petitioner’s use of

the distribution proceeds in this fashion does not exempt the

distribution from the additional tax under section 72(t).

However, section 72(t)(2)(A)(v) provides that the section 72(t)

additional tax does not apply to distributions made to an

employee after separation from service after attainment of age

55.   Petitioner testified he was separated from service at age

56.   Respondent did not challenge that assertion.   On these

facts, the Court sustains petitioner under section

72(t)(2)(A)(v).

      Petitioner conceded the other adjustment noted earlier

relating to two items of unreported income.   Petitioner presented

no evidence addressing the section 6662 penalty as relates to

these two items.   Respondent, therefore, is sustained on the

penalty.
                             - 5 -

    Reviewed and adopted as the report of the Small Tax Case

Division.



                                     Decision will be entered

                             under Rule 155.
