                     T.C. Summary Opinion 2009-34



                         UNITED STATES TAX COURT



                  MICHAEL DAVID LIEBER, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 15703-07S.             Filed March 16, 2009.



        Michael David Lieber, pro se.

        Jeffrey D. Heiderscheit, for respondent.



        JACOBS, Judge:   This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed.     Pursuant to section 7463(b), the

decision to be entered is not reviewable by any other court,

and this opinion shall not be treated as precedent for any other

case.     Unless otherwise indicated, all subsequent section

references are to the Internal Revenue Code in effect for the
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year in issue, and all Rule references are to the Tax Court Rules

of Practice and Procedure.

     Respondent determined a $4,031.10 deficiency in petitioner’s

Federal income tax for 2005.   The deficiency arises from the

imposition of the 10-percent penalty mandated by section 72(q)(1)

for premature distributions from an annuity contract.   Respondent

asserts that the penalty is applicable because petitioner

received distributions in 2005 from an annuity policy contract

(annuity policy) that do not qualify for any of the exceptions

set forth in section 72(q)(2).    Petitioner asserts that the 10-

percent penalty should not apply because the distributions were

used for his college expenses.

                             Background

     The parties submitted this case fully stipulated, pursuant

to Rule 122.   The stipulation of facts and the attached exhibits

are incorporated herein by this reference.   At the time he filed

his petition, petitioner resided in Texas.

     In 1988, when petitioner was very young, his father died.

At the date of his death, petitioner’s father was the insured

under a life insurance policy issued by Jackson National Life

Insurance Co. of Texas (Jackson Life).    A portion of the proceeds

from that policy was used to purchase a single premium,

nonqualified, deferred annuity policy for the benefit of
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petitioner.   The annuity policy permitted partial withdrawals

before the contract’s maturity date of April 14, 2056.

     In 2005 petitioner attended college in Texas.   Petitioner’s

mother (as the owner of the annuity policy) requested, and

received on behalf of petitioner, as the annuitant, distributions

from Jackson Life during 2005 totaling $40,310.80, which were

used for petitioner’s college expenses.1

                            Discussion

     Section 72(q)(1) imposes a 10-percent penalty on

distributions from an annuity contract unless the distribution

satisfies one of the exceptions set forth in section 72(q)(2);

namely, distributions:2

     (A) made on or after the date in which the taxpayer attains
age 59-1/2;


     1
      The annuity policy was purchased pursuant to the order of
the District Court of El Paso County, Tex., 243rd Judicial
District, dated Mar. 20, 1989. The order was issued in response
to a motion to invest funds of a minor, filed by T. Udell Moore,
guardian ad litem, and Gail Lieber, natural mother and next
friend, of Michael David Lieber, a minor. Under the terms of the
annuity policy, (1) Jackson Life agreed to pay the annuitant
(Michael David Lieber), if living on the maturity date, a monthly
income with 120 months certain, and (2) pursuant to the terms of
the annuity policy, while the annuitant is living, the owner
(Gail Lieber) may exercise all rights under the annuity policy
subject to the interest of any assignee or irrevocable
beneficiary.
     2
      Sec. 72(q)(1) was enacted as part of the Tax Equity and
Fiscal Responsibility Act of 1982, Pub. L. 97-248, sec.
265(b)(1), 96 Stat. 546, to discourage the use of annuity
contracts as short-term tax sheltered investments for certain
“premature” distributions. See S. Rept. No. 97-494 (Vol. 1), at
349 (1982).
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     (B) made on or after the death of the holder;

     (C) attributable to the taxpayer’s becoming disabled;

     (D) that are part of a series of substantially equal
periodic payments;

     (E) from certain qualified plans as described in section
72(e)(5)(D);

     (F) allocable to investment in the contract before August
14, 1982;

     (G) under a qualified funding asset (within the meaning of
section 130(d), without regard to whether there is a qualified
assignment);

     (H) to which section 72(t) applies (without regard to
paragraph (2) thereof);

     (I) under an immediate annuity contract (within the meaning
of section 72(u)(4));3 or

     (J) from an annuity purchased by an employer, under certain
circumstances.

     None of the section 72(q)(2) distribution exceptions is

herein applicable.   Nonetheless, petitioner contends that the

higher education exception (section 72(t)(2)(E)), which applies

to the penalty for early distributions from qualified retirement

plans (section 72(t)(1)), should apply to distributions from

annuity contracts since the title of section 72, “Annuities;


     3
      The annuity policy involved herein would not qualify as an
immediate annuity contract. Although it was purchased with a
single premium, the annuity policy’s starting date (the first day
of the first period for which an amount is received as an annuity
under the policy) was not within 1 year from the date of the
purchase of the annuity policy, and it did not provide for a
series of substantially equal periodic payments during the
annuity period.
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Certain Proceeds of Endowment and Life Insurance Contracts”,

indicates that all of the section’s provisions apply to

annuities.   This argument fails inasmuch as it is well settled

that the heading of a section does not limit the plain meaning of

the text.    See Bhd. of R.R. Trainmen v. Balt. & Ohio R.R., 331

U.S. 519, 528 (1947); Warren v. Commissioner, 114 T.C. 343, 347

(2000).   The relevant text of section 72(q)(2) is clear; nothing

therein contains either:   (1) An exception for higher education

expenses, or (2) a provision that the exception found in section

72(t)(2)(E) applies to the 10-percent penalty under section

72(q)(1).

     Section 72(t)(2)(E) specifically limits its reach to the 10-

percent additional tax on distributions from qualified retirement

plans under section 72(t)(1), and we have held that the higher

education expense exception found in section 72(t)(2)(E) does not

apply to the section 72(q)(1) penalty for premature distributions

from annuity contracts.    See Sadberry v. Commissioner, T.C. Memo.

2004-40, affd. 153 Fed. Appx. 336 (5th Cir. 2005).

     Petitioner next makes an equitable argument; namely, that

the distributions he received in 2005 should not be subject to

the section 72(q)(1) penalty because:   (1) The annuity policy was

purchased to provide funds for petitioner’s college expenses and

therefore should be excepted from the section 72(q)(1) penalty by

section 72(t)(2)(E), and (2) petitioner’s mother was informed by
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her father (who was an insurance agent and who “worked with

annuities”) that there would be “no repercussions for early

withdrawals if the funds were used solely for higher educational

purposes.”   Moreover, petitioner asserts that the certified

public accountant who prepared his 2005 tax return knew that the

annuity policy had been purchased in order to provide funds for

petitioner’s educational expenses.

     The equitable argument petitioner advances is not relevant.

This Court, like all other courts, construes statutes as written;

we do not enlarge them.   We cannot create exceptions in order to

reach what someone believes is an equitable outcome.   See Iselin

v. United States, 270 U.S. 245, 250 (1926); Pollock v.

Commissioner, 132 T.C. __ (2009); Paxman v. Commissioner, 50 T.C.

567, 576-577 (1968), affd. 414 F.2d 265 (10th Cir. 1969).

Moreover, we are mindful that a letter from Jackson Life dated

September 26, 2007, informed petitioner:

     We have also researched how this policy should be qualified.
     Per the court order we have in our records it instructed us
     to issue a deferred annuity. The court order did not state
     that this should be issued as a retirement annuity or an
     educational annuity. Therefore, this policy was issued as a
     non-qualified annuity.

     Finally, petitioner maintains that the annuity distributions

are excepted from the 10-percent penalty by section 72(q)(2)(B),

which provides that no penalty shall be imposed on any

distribution made on or after the death of the holder of the

annuity, because the annuity was funded by the proceeds from his
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father’s life insurance policy.    Again, we disagree with

petitioner’s assertion.   The distributions involved herein were

not made on or after the death of the holder of the annuity

policy.

     We have considered all petitioner’s arguments, and to the

extent not discussed herein, we reject them as irrelevant and/or

without merit.   We sustain the deficiency of $4,031.10 determined

in respondent’s notice of deficiency.

     To reflect the foregoing,


                                              Decision will be entered

                                         for respondent.
