                       T.C. Memo. 1996-517



                     UNITED STATES TAX COURT



              JEFFERY ALLEN ROBINSON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 11989-95.                Filed November 25, 1996.


     Jeffery Allen Robinson, pro se.

     John J. Boyle, for respondent.



                       MEMORANDUM OPINION


     COUVILLION, Special Trial Judge:   This case was heard

pursuant to section 7443A(b)(3)1 and Rules 180, 181, and 182.

     Respondent determined a deficiency of $1,895 in petitioner's

Federal income tax for 1992 and the 10-percent additional tax on


1
      Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year at issue. All Rule
references are to the Tax Court Rules of Practice and Procedure.
                               - 2 -


early distributions from qualified retirement plans under section

72(t).

     The issues for decision are:   (1) Whether petitioner failed

to report wage income of $1,179 in 1992; (2) whether petitioner

failed to report interest income of $28 in 1992; (3) whether a

lump-sum payment of $4,822 received during 1992 by petitioner

from a qualified employee retirement plan maintained by the

Greater Columbus Convention Center (the convention center) is

includable in gross income in the year of distribution; and (4)

whether petitioner is liable for the 10-percent additional tax on

early distributions from qualified retirement plans under section

72(t).   The remaining adjustments in the notice of deficiency are

computational and will be resolved by the Court's holdings on the

aforementioned issues.2

     Some of the facts were stipulated, and those facts, with the

annexed exhibits, are so found and are incorporated herein by

reference.   At the time the petition was filed, petitioner's

legal residence was Columbus, Ohio.

     During the year at issue, petitioner was employed by the

convention center as a crew foreman.   Petitioner had been

employed by the convention center for approximately 10 years when


2
      Respondent determined a reduction of $682 in the earned
income credit claimed by petitioner. Further, respondent allowed
petitioner an additional withholding credit of $25 representing
taxes withheld on the $1,179 unreported wage income.
                               - 3 -


he left his position on September 26, 1992.   As a result of his

termination of employment, petitioner received a lump-sum

distribution of the retirement benefits being held on his behalf

in the Greater Columbus Convention Center Benefit Plan.

Petitioner was thereafter employed by the K-Mart Corp. during

1992.

     On his 1992 Federal income tax return, petitioner reported

taxable wage income from the convention center in the amount of

$10,980.   In the notice of deficiency, respondent determined that

petitioner had unreported taxable wage income of $1,179,

unreported taxable interest income of $28, and unreported taxable

lump-sum pension income of $4,822, all based on information

reported to respondent by the respective payers.   Also in the

notice of deficiency, respondent determined that petitioner was

liable for the 10-percent additional tax on an early distribution

from a qualified plan under section 72(t) in the amount of $482.

     The determinations of the Commissioner in a notice of

deficiency are presumed correct, and the burden is on the

taxpayer to prove that the determinations are in error.    Rule

142(a); Welch v. Helvering, 290 U.S. 111 (1933).

     Section 61 provides that gross income includes "all income

from whatever source derived" unless otherwise provided.

Furthermore, a taxpayer is required to maintain records
                                - 4 -


sufficient to establish the amount of his or her income and

deductions.    Sec. 6001.

     The first issue is whether petitioner failed to report wage

income of $1,179 from his employment with K-Mart Corp. during

1992.    The parties stipulated, and petitioner acknowledged at

trial, that he received wages during 1992 from K-Mart Corp. in

the amount of $1,179, which he failed to report on his income tax

return.    Petitioner testified that he failed to report such wages

because he used these wages to replace an automobile that was

stolen from him during December 1992.

     Section 61(a)(1) provides that "compensation for services"

must be included in income.    Petitioner presented no authority to

support his position that the unreported wage income constituted

an offset to any theft loss he sustained.    The Court rejects

petitioner's position that such income was offset by a theft

loss.3    Consequently, the Court holds that the $1,179 wage income


3
      Petitioner did not itemize deductions on his 1992 income
tax return that he filed as head of household claiming the
standard deduction of $5,250. The Court advised petitioner at
trial that a theft loss is allowable under sec. 165(c)(3) only as
an itemized deduction. However, based on petitioner's testimony,
it is unlikely that petitioner could have obtained any tax
benefit from a theft loss because his basis in the automobile was
$1,500, and it is likely that the fair market value at the time
of the theft would have been less than $1,500. Under sec.
165(h)(1) and (2), any loss by an individual from a casualty or
theft shall be allowed only to the extent the amount of the loss
from each casualty or theft exceeds $100 and only to the extent
that the amount of the net casualty or theft losses for the year
exceeds 10 percent of the taxpayer's adjusted gross income.
                               - 5 -


received by petitioner constituted gross income for Federal

income tax purposes.   Respondent, therefore, is sustained on this

issue.

     The second issue is whether petitioner failed to report

interest income of $28 from State Savings Bank in 1992.   The

parties stipulated, and petitioner acknowledged at trial, that he

received interest during 1992 from State Savings Bank in the

amount of $28, which he failed to report on his income tax

return.   Petitioner testified that he failed to report the

interest because he used the interest to pay the fee for an

income tax course that he attended in 1992 sponsored by H & R

Block.

     Section 61(a)(4) provides that gross income includes

"interest".   Petitioner presented no authority to support his

position that he could offset his interest income by the cost of

a tax course.   The Court rejects petitioner's contention.4

Consequently, the Court holds that the $28 interest income

constituted gross income under section 61(a)(4).   Respondent,

therefore, is sustained on this issue.


4
     Sec. 212(3) allows as an itemized deduction for an
individual's taxable year any "ordinary and necessary" expenses
paid "in connection with the determination, collection, or refund
of any tax". The Court advised petitioner at trial that,
although the fee for his income tax course may have been
allowable as a deduction under sec. 212(3), it must have been
taken as an itemized deduction from his adjusted gross income.
See Wassenaar v. Commissioner, 72 T.C. 1195, 1201-1202 (1979).
                               - 6 -


     The third issue is whether a lump-sum payment of $4,822

received by petitioner during 1992 from the employee retirement

plan maintained by the convention center is includable in gross

income in the year of distribution.    The parties stipulated, and

petitioner acknowledged at trial, that he received, in November

1992, a lump-sum distribution from the employee retirement plan

with the convention center in the amount of $4,822, which he

failed to report on his income tax return for 1992.    In his

petition, petitioner alleged that, since the $4,822 distribution

was paid to him in November 1992, the 60-day period in which a

rollover of such a distribution is allowed (which is discussed

below) continued into January 1993.    Therefore, petitioner

contends that taxation of the funds, if any, should have occurred

in the 1993 tax year rather than 1992.

     At trial, petitioner acknowledged that the $4,822

distribution was not rolled over into an Individual Retirement

Account (IRA) or into any other qualified plan within 60 days,

either in 1992 or 1993.   Petitioner contended that he could not

roll over the distribution for reasons which are not entirely

clear to the Court and, to some extent, inconsistent.    One reason

advanced by petitioner was that he could only contribute $2,000

to an IRA, and, since his distribution exceeded that amount, he
                                - 7 -


was precluded from rolling over the distribution to an IRA.5

Another reason advanced by petitioner is that, because he was

covered by a qualified plan at K-Mart, this also precluded his

entitlement to a rollover of the distribution from his former

employer, the convention center.   Petitioner appears to further

contend that, by virtue of his being a participant in the K-Mart

plan, such participation constituted a rollover of the convention

center distribution without an actual transfer of the

distribution to the K-Mart plan.

     Section 402(a)(1) provides that "the amount actually

distributed to any distributee by any employees' trust described

in section 401(a) * * * shall be taxable to him, in the year in

which so distributed, under section 72 (relating to annuities)."

However, an exception to this general rule is found in section

402(a)(5)(A), which provides:



5
      Petitioner apparently is confused by the fact that, sec.
219 allows as a deduction for a contribution to an IRA for any
taxable year an amount not to exceed the lesser of $2,000 or the
amount of the compensation includable in the individual's gross
income for such taxable year. Sec. 219(d)(2) provides that a
qualifying rollover to an IRA (including, but not limited to,
those described in sec. 402(a)(5)) is not deductible as a
"qualified retirement contribution" under sec. 219(a). Moreover,
a qualifying rollover to an IRA is not included in the
calculation of an "excess contribution" to which an excise tax
applies under sec. 4973(a). Sec. 4973(b)(1)(A). Consequently, a
qualified rollover is not includable in gross income (as
explained hereafter in the main text), nor deductible against
gross income, nor subjected to an excise tax in the year of the
rollover (i.e., a "wash" transaction for tax purposes).
                               - 8 -


     If * * * any portion of the balance to the credit of an
     employee in a qualified trust is paid to him, * * * [and]
     the employee transfers any portion of the property he
     receives in such distribution to an eligible retirement
     plan, [i.e., rollover] * * * then such distribution (to the
     extent so transferred) shall not be includible in gross
     income for the taxable year in which paid.


Further, section 402(a)(5)(C) provides that such a rollover

exclusion shall not apply "to any transfer of a distribution made

after the 60th day following the day on which the employee

received the property distributed."    In other words, if a

taxpayer receives a distribution from a retirement plan and fails

to make a rollover of such distribution to an "eligible

retirement plan" within 60 days of taxpayer's receipt of such

distribution, it shall be taxable to him under section 72 in the

year of distribution.   There is no provision in the law deferring

the inclusion of the distribution into gross income until the

succeeding year simply because the 60-day rollover period extends

into the succeeding year.

     The term "eligible retirement plan" is defined in section

402(a)(5)(E)(iv) as "(I) an individual retirement account * * *,

(II) an individual retirement annuity * * *, (III) a qualified

trust, and (IV) an annuity plan described in section 403(a)."

(Emphasis added.)   A "qualified trust" is defined in section

402(a)(5)(E)(iii) to mean "an employees' trust described in

section 401(a) which is exempt from tax under section 501(a)."
                                - 9 -


     Petitioner failed to make a section 402(a)(5)(A) rollover of

the $4,822 distribution, either to an IRA or any other type of

eligible retirement plan.   Furthermore, merely being a

participant in another qualified retirement plan does not, in and

of itself, constitute a rollover into such plan of a distribution

from a separate qualified retirement plan.    Consequently, the

Court holds that the $4,822 distribution from the retirement plan

at the convention center was not "transferred" to an "eligible

retirement plan" as required by section 402(a)(5)(A) in order for

such distribution to be excluded from petitioner's gross income.

     Finally, section 72(a) contains the general rule for

annuities, and section 72(e) contains the rule for payments that

are not received as an annuity (i.e., petitioner's $4,822

distribution).   Under section 72(e)(5)(A), amounts received from

qualified plans under section 401(a) are included in gross income

only to the extent that the amounts received exceed the

distributee's "investment in the contract".    Section 72(e)(6)

defines generally "investment in the contract" as being the

consideration paid for the contract less amounts received under

the contract before the distribution that are excludable from

gross income.    Thus, any nondeductible contributions a taxpayer

has made to a retirement plan are excluded from gross income when

such distributions are made.   Petitioner presented no evidence to

establish that he made any nondeductible contributions to the
                              - 10 -


retirement plan maintained by the convention center.   Therefore,

the entire amount of the distribution petitioner received is

includable in gross income for purposes of section 72(e)(5)(A)

and (e)(6).

     In summary, petitioner failed to present evidence that his

exclusion from gross income of the $4,822 distribution from his

retirement plan maintained by the convention center was correct

and that respondent's determinations regarding such distribution

were incorrect.   Respondent, therefore, is sustained on this

issue.

     The final issue is whether petitioner is liable for the 10-

percent additional tax on early distributions from qualified

retirement plans under section 72(t).   Section 72(t)(1) provides

that:


     If any taxpayer receives any amount from a qualified
     retirement plan * * * 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 includible in gross income.


Section 72(t)(2) provides several exceptions to the 10-percent

additional tax including, but not limited to:


     Distributions which are: (i) made on or after the date on
     which the employee attains age 59 1/2, (ii) made to a
     beneficiary (or to the estate of the employee) on or after
     the death of the employee, * * * (v) made to an employee
     after separation from service after attainment of age 55
     * * *
                              - 11 -




     Petitioner was born on October 3, 1955.   Therefore, at the

time of his "separation from service" from the convention center,

and at the time of the $4,822 distribution, petitioner was 37

years of age.   Petitioner presented no evidence to show that any

of the other exceptions under 72(t)(2) applied to exclude the

distribution from the 10-percent additional tax provided for in

72(t)(1).   The Court holds that petitioner is liable for the 10-

percent additional tax on early distributions from qualified

retirement plans under section 72(t).   Respondent, therefore, is

sustained on this issue.



                                         Decision will be entered

                                    for respondent.
