                  T.C. Summary Opinion 2005-183



                     UNITED STATES TAX COURT



    JEFFREY THOMAS OLUP AND LOUISE MARIE OLUP, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7925-05S.               Filed December 13, 2005.


     Jeffrey Thomas Olup, pro se.

     Russell F. Kurdys, 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




     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. All monetary amounts are
rounded to the nearest dollar.
                                - 2 -

is not reviewable by any other court, and this opinion should not

be cited as authority.

     Respondent determined a deficiency in petitioners’ Federal

income tax for the taxable year 2002 of $986.    Hereinafter

references to petitioners individually are to Mr. Olup or Mrs.

Olup.

     The sole issue for decision is whether petitioners are

liable, under section 72(t), for the 10-percent additional tax on

an early distribution from Mr. Olup’s individual retirement

account (IRA).   We hold that they are.

                            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, petitioners resided

in Monongahela, Pennsylvania.

     In April 1995, Mr. Olup purchased a townhouse in Cecil

Township, Pennsylvania.   The townhouse was Mr. Olup’s principal

residence from April 1995 to April 2003.    At all relevant times,

Mr. Olup was the sole owner of this townhouse.

     Petitioners met in January 2000.2    At that time, Mrs. Olup

had resided continuously with her parents in Monessen,




     2
         At that time, Mrs. Olup was 24 years old.
                                - 3 -

Pennsylvania, since high school.    Mrs. Olup has not been employed

since 1998.

     Petitioners were married on June 9, 2001.   After their

marriage, Mrs. Olup moved into the townhouse with Mr. Olup.     In

2002, petitioners began looking for a primary marital residence

closer to Mrs. Olup’s family.

     On June 13, 2002, petitioners purchased a lot at 231

Galbreath Drive, Monongahela, Pennsylvania 15063 (Galbreath

home), and began construction of a single family residence.

Petitioners were listed as joint owners on the property’s title

as well as on the mortgage.   The Galbreath home was Mrs. Olup’s

first ownership interest in real estate.   Petitioners moved into

the Galbreath home in April 2003.   Since then, petitioners have

maintained the Galbreath home as their first marital residence.

     In 2002, Mr. Olup withdrew $20,617 from his IRA.    He

received the IRA distribution from Janus Mutual Funds.    The

distribution proceeds were used to pay the acquisition costs for

the Galbreath home.

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

Tax Return, for 2002.   On line 15b of their return, petitioners

reported the $20,617 distribution from Mr. Olup’s IRA as taxable

income.   Petitioners attached to their return, inter alia, Form

5329, Additional Taxes on Qualified Plans (Including IRAs) and

Other Tax-Favored Accounts.   On the Form 5329, petitioners
                               - 4 -

claimed that $10,000 of the distribution was excluded from the

additional tax on early distributions under exception No. 1 (IRA

distributions made for purchase of a first home, up to $10,000).

Petitioners then reported on their return $1,061 for the 10-

percent additional tax computed on the remaining distribution of

$10,617.

     In the notice of deficiency, respondent determined that

petitioners are liable for the 10-percent additional tax on the

entire distribution under section 72(t) because Mr. Olup is not a

first-time homebuyer.

     Petitioners filed a timely petition with the Court.

Paragraph 4 of the petition states in relevant part:

     Petitioners filed form 5329 and excepted $10,000 from
     the “additional tax” due to construction of our home.
     Petitioners argument is that the distributions were
     used in the acquisition of a principal residence and
     that the distributions were qualified first-time
     homebuyer distributions within the intent and meaning
     of section 72(t)(8).

                            Discussion3

     Generally, a distribution from an IRA is includable in the

distributee’s gross income in the year of distribution under the

provisions of section 72.   Secs. 61(a)(9), 408(d)(1), (3); see

secs. 408(a), 4974(c)(4).   Such distributions made prior to a



     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 generally sec. 7491(a); Rule
142(a); Higbee v. Commissioner, 116 T.C. 438 (2001).
                               - 5 -

taxpayer’s attaining the age of 59-1/2 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).

     As relevant herein, section 72(t)(2)(F) exempts

distributions from the early withdrawal tax to the extent such

distributions are qualified first-time homebuyer distributions.

See sec. 72(t)(2)(F), (8).   The maximum amount of a distribution

that may be treated as a qualified first-time homebuyer

distribution is $10,000.   Sec. 72(t)(8)(B).   Any amount of a

distribution that petitioners received in excess of $10,000

remains subject to the 10-percent additional tax required by

section 72(t).   Id.

     A qualified first-time homebuyer distribution is defined in

section 72(t)(8)(A) as:

          (A) In general. -- * * * any payment or
     distribution received by an individual to the extent
     such payment or distribution is used by the individual
     * * * to pay qualified acquisition costs with respect
     to a principal residence of a first-time homebuyer who
     is such individual, the spouse of such individual, or
     any child, grandchild, or ancestor of such individual
     or the individual’s spouse.

     As relevant herein, a first-time homebuyer means any

individual “if such individual (and if married, such individual’s

spouse) had no present ownership interest in a principal

residence during the 2-year period ending on the date of

acquisition of the principal residence”.    Sec. 72(t)(8)(D)(i)(I).
                                - 6 -

The date of acquisition is the date on which construction of a

principal residence is commenced.   Sec. 72(t)(8)(D)(iii)(II).

     Petitioners contend that they qualify as first-time

homebuyers within the intent and meaning of section 72(t)(8).

Petitioners argue that Congress intended the statute to be

liberally construed such that in the case of a married couple,

the first-time homebuyer exception analysis must consider whether

the “marital unit” is a first-time homebuyer of its first

“marital residence”.   It follows, in petitioners’ view, that they

qualify as first-time homebuyers as a marital unit because the

Galbreath home is their first marital residence under section

72(t)(8).   We disagree.

     In interpreting a statute, we look first to the language of

the statute, and we look only to legislative history to learn the

purpose of the statutory language or to resolve ambiguities in

the statutory language.    Consumer Prod. Safety Commn. v. GTE

Sylvania, Inc., 447 U.S. 102, 108 (1980).   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., supra; United

States v. Am. Trucking Associations, 310 U.S. 534, 543-544

(1940); Allen v. Commissioner, 118 T.C. 1, 7 (2002).    A court,
                                - 7 -

however, may depart from the plain language of the statute only

by an extraordinary showing of a contrary congressional intent in

the legislative history.    Garcia v. United States, 469 U.S. 70,

75 (1984).

       Petitioners’ argument overlooks the plain language of

section 72(t)(8)(D).    Section 72(t)(8)(D)(i) refers to a first-

time homebuyer in the singular form as any individual.    It

further provides that, in the context of an individual that is

married, such individual’s spouse also must satisfy the first-

time homebuyer test as an individual.    It follows therefrom that

the language of section 72(t)(8)(D)(i) requires that both owners

of the property must individually satisfy the first-time

homebuyer test.    In other words, each individual homebuyer in a

marital unit must have had no prior ownership interest in a

principal residence.    The legislative history of section

72(t)(8)(D) further supports this interpretation.    According to

the House and Senate reports: “The bill requires that the spouse

of the individual also meet this requirement as of the date the

contract is entered into or construction commences.”    S. Rept.

105-33, at 30-31 (1997), 1997-4 C.B. (Vol. 2) 1067, 1110; H.

Conf. Rept. 105-220, at 381 (1997), 1997-4 C.B. (Vol. 2) 1457,

1851; H. Rept. 105-148, at 338 (1997), 1997-4 C.B. (Vol. 1) 319,

660.
                               - 8 -

     Further, to broadly construe the statute such that the term

“principal residence” encompasses a “first-time marital

residence” extends beyond the plain meaning of the statute.

There is no reference in the statutory language or in the

legislative history indicating that Congress intended a different

analysis for a married couple purchasing their first marital

residence where one spouse has had an ownership interest in a

prior principal residence and the other spouse has not had an

ownership interest in a prior principal residence.   If Congress

had intended to create a separate analysis for the marital unit

purchasing its first marital residence, it could have easily done

so explicitly in section 72(t)(8)(D).

     Petitioners ask the Court to construe the statute equitably

in their favor.   We decline to do so.   Although we acknowledge

that petitioners used Mr. Olup’s IRA distribution for laudable

purposes, we must apply the law as Congress enacted it, absent

some constitutional defect, and we may not rewrite it.    See

Commissioner v. Lundy, 516 U.S. 235, 252 (1996).

     Petitioners do not dispute that Mr. Olup individually is not

a qualified first-time homebuyer under section 72(t)(8)(D).

Therefore, we conclude that $20,617 of Mr. Olup’s IRA

distribution is subject to the additional tax under section

72(t).   Accordingly, we sustain respondent’s determination.
                              - 9 -

     We have considered all of the other arguments made by

petitioners, and, to the extent that we have not specifically

addressed them, we conclude that they are without merit.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect our disposition of the disputed issues,



                                      Decision will be entered

                              for respondent.
