                     T.C. Summary Opinion 2006-71



                       UNITED STATES TAX COURT



          RICHARD L. AND STEPHANIE S. BARBEE, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 9408-04S.             Filed April 27, 2006.


     Richard L. and Stephanie S. Barbee, pro se.

     Elke B. Esbjornson, for respondent.



     COUVILLION, Special Trial Judge:    This case was heard

pursuant to section 7463 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.

     Respondent determined a deficiency of $1,382 in petitioners’

2000 Federal income tax.    The sole issue for decision is whether



     1
      Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the year at issue.
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petitioners are liable for the 10-percent additional tax under

section 72(t) for an early distribution from a qualified

retirement plan.

     Some of the facts were stipulated.      Those facts and the

accompanying exhibits are so found and are incorporated herein by

reference.   Petitioners’ legal residence at the time the petition

was filed was McKinney, Texas.

     Stephanie S. Barbee (petitioner) was employed for 7 years by

the Texas Workforce Commission, formerly the Texas Employment

Commission, as an employment interviewer.      Her agency dealt with

unemployment insurance benefits.    Petitioner, as a State

employee, was a participant in the Employees Retirement System of

Texas.

     During 1999, petitioner resigned from her employment.      At

the time she left her employment, she was not eligible to draw

retirement benefits from the plan.       She was, however, entitled to

make withdrawals from the plan.    Petitioner husband Richard L.

Barbee, during the year at issue, was a full-time student at the

University of North Texas at Denton, Texas.      In order to defray

Mr. Barbee’s educational expenses, petitioner withdrew $13,817.18

during 2000 from the Employees Retirement System of Texas, and

used those moneys exclusively for payment of Mr. Barbee’s higher

education expenses.   On their Federal income tax return for 2000,

pursuant to a Form 1099-R, Distributions From Pensions,
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Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance

Contracts, etc., issued by the Employees Retirement System of

Texas, petitioners reported the $13,817.18 as income.   In the

notice of deficiency, respondent determined that petitioners are

liable for the section 72(t) additional tax.   In the explanation

of adjustments accompanying the notice of deficiency, the

determination is explained as follows:


     A.   Tax on Premature Distribution

     It is determined that you received a distribution from a
     retirement plan in the amount of $13,817.00, before age 59-
     1/2, which is subject to a 10% early withdrawal tax. The
     distribution does not meet an exception to the early
     withdrawal tax. Although you used the funds for higher
     education expenses, the distribution was not made from an
     individual retirement account. Accordingly, your tax is
     increased $1,382.00.


     Petitioners contend that, because the withdrawn amounts were

used exclusively for higher education expenses, they are not

subject to the section 72(t) additional tax.   Respondent agrees

that the withdrawn proceeds were used exclusively for higher

education expenses within the intent and meaning of section

72(t)(2)(E); however, respondent argues that the Employees

Retirement System of Texas is not in the category of qualified

plans to which the provisions of section 72(t)(2)(E) are

applicable.   Petitioners argue that they consulted various

employees of the Internal Revenue Service and were advised that
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the section 72(t) additional tax was not applicable in their

case.   Respondent, while agreeing that the proceeds withdrawn

from the Employees Retirement System of Texas were used

exclusively for higher education expenses under section 72(t)(7),

contends that the distribution petitioners received was not a

withdrawal from a qualified plan to which the section 72(t)(2)(E)

exception is applicable.

     Section 72(t)(1) imposes an additional tax on distributions

from a “qualified retirement plan” equal to 10-percent of the

portion of such amount that is includable in gross income unless

the distribution comes within one of several statutory

exceptions.    For purposes of the 10-percent additional tax, a

qualified retirement plan includes both a section 401(k) plan and

an individual retirement account or individual retirement

annuity.   See secs. 72(t)(1), 401(a), (k)(1), 4974(c)(1), (4),

and (5).   The 10-percent additional tax imposed on early

distributions from qualified retirement plans does not apply to

distributions from an individual retirement plan used for higher

education expenses of the taxpayer for the taxable year.     Sec.

72(t)(2)(E).    The term “individual retirement plan” is defined as

an individual retirement account or individual retirement annuity

(commonly referred to as IRAs).    Sec. 7701(a)(37).   Retirement

plans qualified under section 401(a) and (k), however, are not
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included in the definition of “individual retirement plan” under

section 7701(a)(37).

     Clearly, Congress intended the exception of section

72(t)(2)(E) to apply only to distributions from “individual

retirement plans”; i.e., IRAs, and not to all qualified

retirement plans.   See secs. 4974(c)(4) and (5) and 7701(a)(37);

Taxpayer Relief Act of 1997, Pub. L. 105-34, sec. 203(a), 111

Stat. 809.   This is evident in the report of the Committee on the

Budget, which provides:

          Penalty free IRA withdrawals for education
     expenses--The bill provides that individuals may make
     penalty-free withdrawals from their IRAs to pay for the
     undergraduate and graduate higher education expenses of
     themselves, their spouses, their children and
     grandchildren or the children or grandchildren of their
     spouses. [Emphasis added.]

H. Rept. 105-148, at 288-289 (1997), 1997-4 C.B. (Vol. 1) 319,

610-611.   The report of the Committee on the Budget specifically

provides that only withdrawals from IRAs that are used for higher

education expenses will qualify as withdrawals excepted from the

10-percent additional tax.   Id.   No other types of qualified

plans are provided this exemption from the section 72(t)

additional tax.

     A copy of the plan of the Employees Retirement System of

Texas was offered into evidence.   The explanatory information

about the system states expressly:     “Your retirement program is a

defined benefit plan.   It is qualified under Section 401(a) of
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the Internal Revenue Code.”   Petitioner, therefore, was not the

beneficiary of an individual retirement plan under section

7701(a)(37), which defines an individual retirement plan as an

individual retirement account under section 408(a) or an

individual retirement annuity under section 408(b).    In short,

petitioners’ claim that the withdrawal at issue is excluded from

the 10-percent additional tax is incorrect.   The section

72(t)(2)(E) exclusion from the additional tax does not apply to

section 401(a) withdrawals.

     Petitioners argue that they were led to believe by employees

and agents of the Internal Revenue Service that the withdrawals

in question were not subject to the 10-percent additional tax

because the proceeds were used for higher educational benefits.

Such advice or information was erroneous as relates to the facts

of this case.   The law is well settled that the Commissioner is

not estopped or bound by erroneous representations of agents or

employees.   Estate of Emerson v. Commissioner, 67 T.C. 612, 617-

618 (1977); Auto. Club of Michigan v. Commissioner, 353 U.S. 180

(1957).   Petitioners also argue that they had other individual

retirement accounts from which they could have made withdrawals

to use for Mr. Barbee’s higher educational expenses.    Petitioners

cite no authority to support that argument, nor does this Court

have authority to attribute the withdrawal in that manner.    The

short answer to that argument is that petitioners are bound by
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the course of action they chose.   Since they did not choose to

make their withdrawals from their other IRAs, the Court can only

decide the tax consequences of the course of action petitioners

chose.   The Court, therefore, sustains respondent.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                       Decision will be entered

                               for respondent.
