The Lawletter Vol 42 No 8
It is not often, if ever, that the U.S. Tax Court quotes a show business celebrity in its opinions, but it did so in a summary opinion filed on August 16, 2017, in the case of Omoloh v. Commissioner, T.C. Summ. Op. 2017-64, 2017 WL 3530853. The case turned on whether the taxpayer, Wilfred Omoloh, was age 59½ at the time that he took a distribution from his individual retirement account ("IRA"). I.R.C. § 72(t) ("10-percent additional tax on early distributions from qualified retirement plans") provides in subsection that (1) if the taxpayer receives a distribution from a qualified retirement plan such as an IRA, the taxpayer's income tax liability for the year will be increased by an amount equal to 10% of the portion of the distribution includible in gross income. However, under subsection (2), the 10% penalty of subsection (1) shall not apply if the distribution is made on or after the date on which the taxpayer attains age 59½.
According to a birth certificate secured from the taxpayer's home country, Kenya, 55 years after his birth, he was born on October 1, 1950. If he had been born on that date, the taxpayer would not have been liable for the additional tax because he would have been over age 59½ at the times of the distributions in 2010 totaling $37,300. However, numerous other documents, including an Application for Status as a Temporary Resident, dated May 4, 1988, a resident alien card, and an Application for Naturalization, dated February 28, 1996, put the taxpayer's birth date as October 1, 1952, which made the taxpayer less than 59½ years of age during the 2010 tax year. The Internal Revenue Service ("IRS") recognized the birth certificate as genuine but questioned the birth date appearing on it because it was the date that the taxpayer himself had provided to the Kenyan authorities. Therefore, the IRS notified the taxpayer of its determinations that (1) the amount of the IRA distributions were includible in his income for 2010; (2) the § 72(t) additional tax was applicable, and (3) a § 6662(a) accuracy-related penalty had to be imposed on the ground that the underpayment of tax required to be shown on the taxpayer's return was a substantial understatement of income tax.
The taxpayer did not dispute the includibility of the distributions in his income but contested the imposition of the additional tax on the basis that the birth date shown on his birth certificate should have prevailed. The Tax Court first noted that, generally, a determination made by the IRS in a notice of deficiency is presumed to be correct, placing the burden on the taxpayer to prove that the determination is erroneous. The Tax Court stated that after considering the evidence regarding the taxpayer's age and its reluctance to make any finding as to the petitioner's age, it could only conclude that the taxpayer had failed to establish that the imposition of the additional tax was erroneous. In the course of its opinion, the Tax Court stated:
According to Helen Hayes, "age is not important unless you're a cheese." Maybe so, but petitioner's age . . . as of the dates the distributions were made pretty much determines the issues remaining in dispute.
Omoloh, 2017 WL 3530853, at *2.In the end, the taxpayer was liable for the tax deficiency in the amount of $9,525 and a § 6662(b)(2) accuracy-related penalty of $1,905. Interestingly, the Tax Court indicated that the penalty could have been avoided as to the amount of the added tax if the taxpayer had shown that his claim of being 59½ or older at the time of the distributions in 2010 was made in good faith and with reasonable cause. The self-serving entry of his date of birth on the birth certificate could not meet that standard.