                  T.C. Summary Opinion 2006-177



                     UNITED STATES TAX COURT



                 RICHARD D. SMART, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12217-05S.             Filed October 25, 2006.


     Richard D. Smart, pro se.

     Joseph T. Ferrick, for respondent.



     ARMEN, Special Trial Judge:   This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect when 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 2002,
the taxable 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 the taxable year 2002 of $11,625.10.    The sole

issue for decision is whether petitioner is liable, under section

72(t), for the 10-percent additional tax on an early distribution

from petitioner’s qualified retirement plan.    We conclude that he

is.

                              Background

       Some of the facts have been stipulated, and they are so

found.     We incorporate by reference the parties’ stipulation of

facts and accompanying exhibits.

       At the time that the petition was filed, petitioner resided

in Macomb, Illinois.

       Petitioner worked for Connor Company for 22 years.   He

participated in the company’s Employees Savings and Profit

Sharing 401(k) Plan (401(k)) and retired in 2002 at the age of

54.2

       During 2002, petitioner received two distributions from his

401(k) account.    One of the distributions comprised just the

earnings on the money invested into his 401(k) account;

petitioner rolled over the entire amount, $110,686.68, into an

individual retirement account.    This distribution is not at issue

in this case.


       2
        There is no dispute that this 401(k) plan is a qualified
retirement plan for Federal tax purposes. See secs. 401(a),
(k)(1), 4974(c)(1).
                                - 3 -

     The other distribution, $116,251.20, comprised the employer

and pretax employee contributions to petitioner’s 401(k); income

tax was withheld from this distribution, and he used a portion of

the distribution to pay off personal debts.    He used the

remainder, approximately $30,000, to assist in the acquisition of

his first home.

     Petitioner timely filed a Form 1040, U.S. Individual Income

Tax Return, for 2002.    On his return, petitioner properly

reported the $116,251.20 distribution as income but did not

report the 10-percent additional tax for early distributions

under section 72(t).    In the notice of deficiency, respondent

determined that petitioner was liable for the 10-percent

additional tax on the early $116,251.20 distribution (hereinafter

the distribution) from his 401(k) plan pursuant to section 72(t).

                             Discussion3

     Generally, a distribution from a qualified plan is



     3
        We decide the issue in this case without regard to the
burden of proof because the facts are not in dispute, and the
issue is legal in nature. See sec. 7491(a); Rule 142(a); Higbee
v. Commissioner, 116 T.C. 438 (2001). In addition, petitioner
does not argue that the burden of proof in this case should be
shifted to respondent under sec. 7491. Furthermore, as we do not
decide the issue in this case on the burden of proof, regardless
of whether the $11,625.10 additional tax under sec. 72(t) would
be considered an “additional amount” under sec. 7491(c), and
regardless of whether the burden of production with respect to
this additional tax would be on respondent, respondent in this
case has met any such burden of production by showing that
petitioner received the distribution when he was 54 years of age.
See H. Conf. Rept. 105-599, at 241 (1998), 1998-3 C.B. 747, 995.
                                - 4 -

includable in the distributee’s gross income in the year of

distribution under the provisions of section 72.      Secs.

61(a)(11), 402(a); see secs. 401(a), 4974(c)(1).      Such

distributions made prior to a taxpayer’s attaining the age of 59½

that are includable in income are generally subject to a 10-

percent early withdrawal tax unless an exception to the tax

applies.   Sec. 72(t)(1).

     The section 72(t) additional tax is intended to discourage

premature distributions from retirement plans.      Dwyer v.

Commissioner, 106 T.C. 337, 340 (1996); see also S. Rept. 93-383,

at 134 (1973), 1974-3 C.B. (Supp.) 80, 213.      Being debt free is a

laudable financial goal.    Regrettably, no exception applies for

that purpose; the money petitioner used to pay off his personal

debts remains subject to the 10-percent additional tax.        While

petitioner’s hard work enabled him to retire a bit early, the tax

code is sometimes unforgiving in its attempts at standardization.

     Section 72(t)(2)(F) does exempt distributions from the early

withdrawal tax to the extent such distributions are qualified

first-time homebuyer distributions.      However, the maximum amount

of a distribution that may be treated as a qualified first-time

homebuyer distribution is $10,000.      See sec. 72(t)(8)(B).

Therefore, only $10,000 of the approximately $30,000 petitioner

used to acquire his first home would be eligible for relief from

the additional 10-percent tax under the exception, if applicable,
                                - 5 -

and the remainder would be subject to the additional 10-percent

tax.

       A “[q]ualified first-time homebuyer distribution” is any

payment received by an individual to the extent that the

distribution is used by that individual within 120 days to pay

qualified acquisition costs with respect to a principal residence

if the individual is a first-time homebuyer.    Sec. 72(t)(8)(A).

Unfortunately, the exception under 72(t)(8) is a technical one,

and, because of tragic family circumstances, petitioner falls

outside the exception.

       Petitioner received the distribution in late 2002.   His

younger brother passed away in 2003, and consequently,

petitioner’s new home acquisition was delayed until the fall of

2004, bringing him outside the 120-day window.

       If the language of a statute is plain, clear, and

unambiguous, the statutory language is to be applied according to

its terms unless a literal interpretation of the statutory

language would lead to absurd results.    Robinson v. Shell Oil

Co., 519 U.S. 337, 340 (1997); Consumer Prod. Safety Commn. v.

GTE Sylvania, Inc., 447 U.S. 102, 108 (1980); United States v.

Am. Trucking Associations, Inc., 310 U.S. 534, 543-544 (1940);

Allen v. Commissioner, 118 T.C. 1, 7 (2002).     In the instant

case, the Court deeply sympathizes with petitioner for his loss,

but we are bound by the statutory language and unable to extend
                                 - 6 -

the time limit imposed by law.

     Since the distribution was funded by petitioner’s own

contributions and matching contributions by his former employer,

petitioner argues that the additional tax should not be applied

to these funds even if it would have been applied to a

distribution consisting of the earnings on the funds contributed.

Unfortunately, the tax laws make no distinction, see sec.

61(a)(11), and the 10-percent additional tax applies equally to

both sources of funds.

     In closing, we think it appropriate to observe that we found

petitioner to be a very conscientious taxpayer who takes his

Federal tax responsibilities seriously.    The Tax Court, however,

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 is limited by the exceptions

enumerated in section 72(t).   See, e.g., Arnold v. Commissioner,

111 T.C. 250, 255-256 (1998); Schoof v. Commissioner, 110 T.C. 1,

11 (1998).   Although we acknowledge that petitioner used his

distributions for entirely reasonable purposes, absent some

constitutional defect we are constrained to apply the law as
                              - 7 -

written, see Estate of Cowser v. Commissioner, 736 F.2d 1168,

1171-1174 (7th Cir. 1984), affg. 80 T.C. 783 (1983), and we may

not rewrite the law because we may “‘deem its effects susceptible

of improvement’”, Commissioner v. Lundy, 516 U.S. 235, 252 (1996)

(quoting Badaracco v. Commissioner, 464 U.S. 386, 398 (1984)).

Accordingly, we must sustain respondent’s determination.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect our disposition of the disputed issue,



                                      Decision will be entered

                              for respondent.
