Bohner v. Commissioner

DENNIS E. BOHNER, PETITIONER v. COMMISSIONER

OF INTERNAL REVENUE, RESPONDENT

Docket No. 24166–12. Filed September 23, 2014.

While P worked for the Federal Government, he partici-

pated in the Civil Service Retirement System (CSRS). After P

retired, he received a letter explaining that he could elect to

increase his CSRS retirement annuity by remitting a fixed

sum. P remitted the funds to CSRS. Because P did not have

sufficient funds in his bank account, he borrowed a portion of

the fixed sum. P paid off the loan and replenished his bank

account by making withdrawals from his traditional indi-

vidual retirement account (IRA). P did not report any of the

amounts he withdrew from his IRA as taxable income. P con-

tends that he engaged in a tax-free rollover. R contends that

rollover contributions cannot be made to CSRS. Held: Because

CSRS did not accept his remittance as a rollover, P must

include his withdrawals in his taxable income for the year at

issue.

Kathryn L. Everlove-Stone, for petitioner.

Joel D. McMahan, for respondent.

KERRIGAN, Judge: Respondent determined a deficiency of

$4,590 with respect to petitioner’s Federal income tax for tax

year 2010.

Unless otherwise indicated, all section references are to the

Internal Revenue Code in effect for the year in issue, and all

Rule references are to the Tax Court Rules of Practice and

Procedure.

The sole issue for consideration is whether a tax-free roll-

over occurred when petitioner withdrew funds from his tradi-

tional individual retirement account (IRA) to cover a deposit

of the same amount to the Civil Service Retirement System

(CSRS).

224

(224) BOHNER v. COMMISSIONER 225

FINDINGS OF FACT

Some facts have been stipulated and are so found. Peti-

tioner resided in Florida when he filed the petition.

Petitioner was an employee of the Social Security Adminis-

tration in 2009 and retired before April 13, 2010. He was

eligible to participate in Federal Government retirement

plans offered through the Office of Personnel Management

(OPM), and he participated in CSRS during his years of

Government service.

After petitioner retired, OPM mailed him a letter on April

13, 2010, explaining that he could elect to increase his CSRS

retirement annuity by remitting $17,832 with respect to

creditable Government service for a period during which no

retirement contributions had been withheld from his salary.

The letter required that petitioner remit the funds within 15

days of the date of the letter. The letter was silent as to

whether the remittance could be made through a tax-free

rollover contribution.

Petitioner elected to remit to CSRS the $17,832 to increase

his retirement annuity. Because petitioner did not have suffi-

cient funds to make the entire payment directly from his

bank account, he borrowed a portion of the $17,832 from a

friend. On April 27, 2010, petitioner mailed a check to OPM

for $17,832.

During 2010 petitioner maintained a traditional IRA with

Fidelity Investments (Fidelity). Petitioner made two separate

requests to withdraw funds from his Fidelity IRA, one in

April 2010 and another in May 2010. Petitioner’s monthly

Fidelity investment report for April 2010 shows that he

requested a $5,000 distribution, of which $4,500 was sent to

him on April 15, 2010, and $500 was withheld to satisfy Fed-

eral income tax liability in connection with the distribution.

Petitioner’s Fidelity investment report for May 2010 shows

that he requested a $12,832 distribution, which was sent

entirely to him on May 3, 2010; no Federal tax was withheld.

Petitioner used the funds he received from Fidelity to

reimburse his friend and to replenish his bank account.

Fidelity issued petitioner a Form 1099–R, Distributions

From Pensions, Annuities, Retirement or Profit-Sharing

Plans, IRAs, Insurance Contracts, etc., in which it reported

$17,832 in distributions and listed the entire $17,832 as tax-

226 143 UNITED STATES TAX COURT REPORTS (224)

able income. On his Form 1040A, U.S. Individual Income Tax

Return, for tax year 2010 petitioner reported receipt of the

$17,832 in distributions from his Fidelity IRA on line 11a,

IRA Distributions. He did not report any of the $17,832 as

taxable income as a result of those distributions on line 11b,

Taxable Amount.

On July 2, 2012, respondent issued petitioner a notice of

deficiency which determined a deficiency of $4,590 and

treated the $17,832 withdrawal from the IRA as taxable

income.

OPINION

Generally, the Commissioner’s determinations in a notice

of deficiency are presumed correct, and the taxpayer bears

the burden of proving those determinations are erroneous.

Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).

The parties do not dispute any material facts; therefore, the

burden of proof is not at issue.

I. CSRS

CSRS is a statutorily created retirement plan designed to

provide retirement benefits in the form of annuities and

lump-sum benefits to Federal civil service employees. See

generally 5 U.S.C. secs. 8331–8351 (2006). The statutory

provisions governing CSRS do not include a provision

allowing pretax employee contributions. Id. An eligible

employee contributes portions of his or her salary to CSRS,

and the employing agency withholds the contributions from

the employee’s salary. Id. sec. 8334(a)(1)(A); Malbon v.

United States, 43 F.3d 466, 467 (9th Cir. 1994); see also

Logsdon v. Commissioner, T.C. Memo. 1997–8, slip op. at 3–

4. Matching contributions are made from funds appropriated

for the employing agency. 5 U.S.C. sec. 8334(a)(1)(B)(i).

To assure that income will be taxed only once, the Internal

Revenue Code deems an annuity, such as one for a CSRS

participant, to have two components: one taxable, one not.

See sec. 72; Montgomery v. United States, 18 F.3d 500 (7th

Cir. 1994). The employing agency withholds a mandatory

contribution from the employee’s salary, and that withheld

amount is after-tax income because it is taxable for the year

in which it is withheld. Malbon, 43 F.3d at 467. On distribu-

(224) BOHNER v. COMMISSIONER 227

tion that portion is nontaxable because it was already subject

to tax. See Montgomery, 18 F.3d at 500. The amount contrib-

uted by the employing agency and any interest earned on the

employee’s investment are not taxed to the employee until

distributed. Secs. 72, 402(a). This portion of the distribution

is the taxable component. Montgomery, 18 F.3d at 500.

Petitioner contends that all distributions from CSRS are

taxable and that unless the distributions from his IRA are

excluded from income, he will be subject to double taxation.

Petitioner will not be subject to double taxation, however,

because under section 72 he will be able to exclude from his

gross income CSRS distributions attributable to his pre-

viously taxed contributions to the plan. See sec. 72(c)(1)(A).

Section 72(c)(1)(A) and (B) defines ‘‘investment in the con-

tract’’ as of the annuity starting date as ‘‘the aggregate

amount of premiums or other consideration paid for the con-

tract, minus * * * the aggregate amount received under the

contract before such date, to the extent that such amount

was excludable from gross income under this subtitle or prior

income tax laws.’’

CSRS provisions include that ‘‘[e]ach employee or Member

credited with civilian service after July 31, 1920, for which

retirement deductions or deposits have not been made, may

deposit with interest an amount equal to * * * [certain

statutorily defined] percentages of his basic pay received for

that service’’. 5 U.S.C. sec. 8334(c). This provision allows civil

service employees to elect to make a deposit for creditable

Government service and thus increase their CSRS retirement

annuity. See Dela Cruz v. OPM, 553 Fed. Appx. 977 (Fed.

Cir. 2014).

II. Rollover Contributions Under Section 408(d)(3)

In general, any amount paid or distributed out of an indi-

vidual retirement plan is included in the gross income of the

payee or distributee as provided in section 72. Sec. 408(d)(1);

Arnold v. Commissioner, 111 T.C. 250, 253 (1998). This gen-

eral rule does not apply to a rollover contribution. See sec.

408(d)(3)(A). A rollover contribution is any amount paid or

distributed out of an IRA or individual retirement annuity to

the individual for whose benefit the account or annuity is

maintained if the entire amount received is paid into an

228 143 UNITED STATES TAX COURT REPORTS (224)

eligible retirement plan no later than 60 days after receipt.

Sec. 408(d)(3)(A)(ii); see also Schoof v. Commissioner, 110

T.C. 1, 7 (1998). An ‘‘eligible retirement plan’’ is defined as

any (1) qualified trust; (2) annuity plan described in section

403(a); (3) eligible deferred compensation plan described in

section 457(b) which is maintained by an eligible employer

described in section 457(e)(1)(A); or (4) annuity contract

described in section 403(b). Secs. 408(d)(3)(A), 402(c)(8)(B). A

‘‘qualified trust’’ is any employees’ trust described in section

401(a) which is exempt from tax under section 501(a). Sec.

402(c)(8)(A). Respondent does not dispute that CSRS is a

qualified trust. 1

Respondent contends, however, that petitioner’s deposit to

CSRS does not constitute a rollover contribution under sec-

tion 408(d)(3) because CSRS does not, and is not required to,

accept rollovers. 2

Even though there is no specific provision in the Internal

Revenue Code concerning whether a qualified trust must

accept a rollover that is an indirect transfer from an IRA in

order to constitute an eligible retirement plan for purposes of

section 408(d)(3), this issue is contemplated in similar cir-

1 The Commissioner has taken the position in published guidance that

CSRS is a qualified trust under sec. 401(a). See Rev. Rul. 74–138, 1974–

1 C.B. 29, 30 (‘‘[CSRS] is a qualified trust under section 401(a) of the Code

and is exempt from Federal income tax under section 501(a).’’); Rev. Rul.

68–486, 1968–2 C.B. 184; Rev. Rul. 58–472, 1958–2 C.B. 30; IRS Publ’n

721, Tax Guide to U.S. Civil Service Retirement Benefits 13 (rev. Feb. 22,

2011) (‘‘CSRS, FERS, and TSP are considered qualified retirement plans’’

for the purpose of determining whether a CSRS distribution can be used

in a tax-free rollover to another plan or trust). CSRS is a plan that meets

the requirements of sec. 401(a). Guilzon v. Commissioner, 97 T.C. 237, 241

(1991), aff ’d, 985 F.2d 819 (5th Cir. 1993); Gomez v. Commissioner, T.C.

Memo. 1996–212, slip op. at 5; Roundy v. Commissioner, T.C. Memo. 1995–

298, aff ’d, 122 F.3d 835 (9th Cir. 1997); Shimota v. United States, 21 Cl.

Ct. 510, 519 (1990), aff ’d, 943 F.2d 1312 (Fed. Cir. 1991).

2 Respondent also contends that petitioner’s deposit to CSRS is not a

rollover because the funds paid to CSRS were not a distribution from an

IRA. We have held that the phrase ‘‘if the entire amount is contributed

into an eligible retirement plan’’ is not to be read so narrowly as to require

the taxpayer to roll over the exact same money that he or she received in

the distribution from the IRA. Zaklama v. Commissioner, T.C. Memo.

2012–346, at *68. Respondent did not raise the issue of the second IRA dis-

tribution’s taking place after petitioner’s deposit to CSRS, and we deem re-

spondent to have waived that issue. In any event, our disposition of this

case does not require addressing the timing of the second distribution.

(224) BOHNER v. COMMISSIONER 229

cumstances. Section 401(a)(31)(E) and the legislative history

associated with the rollover provision of section 402 address

this issue in the context of transfers from other qualified

trusts. For the purpose of a direct transfer of eligible rollover

distributions, a qualified trust plan must permit distributees

to elect to have a distribution paid directly to an eligible

retirement plan, which for this purpose must be a defined

contribution plan that permits the acceptance of rollover dis-

tributions. The Senate report explaining this provision

includes the following statement: ‘‘As under present law, a

transfer cannot be made to another qualified plan unless the

terms of the transferee plan permit the acceptance of such

transfer.’’ 138 Cong. Rec. S8180 (1992).

The instant case does not involve a defined contribution

plan; rather, it involves a defined benefit plan. However, for

the reasons explained below, we conclude and hold that

because CSRS did not accept petitioner’s remittance as a roll-

over, he must include his withdrawals in his taxable income

for 2010.

The letter that OPM sent to petitioner after he retired

explained how he could make a deposit to make up for years

for which no retirement contributions were withheld from his

pay. The letter requested that a check be sent to OPM for

these contributions; it is silent on whether the deposit can be

made as a rollover. Title 5 U.S.C. sec. 8334(c) does not

specifically permit civil service employees to remit the

deposit by means of a tax-free rollover contribution from an

IRA or another eligible retirement plan. The regulations

promulgated under 5 U.S.C. sec. 8334(a)(2) likewise do not

require CSRS to accept tax-free rollovers as a form of

deposit. 5 C.F.R. sec. 831.303 (2001).

Amounts deposited under 5 U.S.C. sec. 8334(c) allow civil

service employees to make up for years in which there were

no contributions from their salaries. See 5 C.F.R. sec.

831.303. Deposited amounts take the place of after-tax con-

tributions that were not originally made. See 5 U.S.C. sec.

8334(a), (c). Only the portion of a distribution from an IRA

that is otherwise includible in gross income may be rolled

over from the IRA to an eligible retirement plan other than

an IRA. Sec. 408(d)(3)(A)(ii); see Janine H. Bosley & Martha

L. Hutzelman, Qualified Plans—Taxation of Distributions,

370–3d Tax Mgmt. (BNA), at A–158. After-tax contributions

230 143 UNITED STATES TAX COURT REPORTS (224)

that were made to an IRA cannot be rolled over. See sec.

408(d)(3)(A)(ii); see also Bosley & Hutzelman, supra, at A–

158. A rollover contribution does not result in taxation until

distribution. See secs. 72, 408(d)(3)(A).

The instant case involves an indirect transfer. Because it

was not a direct transfer, CSRS was likely not aware that

petitioner was attempting to make a tax-free rollover con-

tribution, and there is nothing in the record to suggest that

petitioner informed CSRS of his attempt to make a rollover.

Unless it explicitly accepted rollovers, a qualified plan such

as CSRS would not be aware of the proper tax treatment of

the payment upon distribution.

Even if CSRS accepted rollovers, section 408(d)(3)(A)(ii)

would permit it to accept as a rollover only the portion of the

IRA distribution includible in gross income. Petitioner

attempted to effect a rollover in order to make the payment

to CSRS with pretax dollars. Petitioner did not distinguish

for CSRS the extent to which the payment was made with

pre- or post-tax dollars. Petitioner’s deposit was to make up

for wage contributions which were not withheld in prior

years; those contributions would have been taxable. CSRS

does not provide for the acceptance of rollovers. Because the

payment was not accepted as a pretax contribution, it is tax-

able. See Montgomery, 18 F.3d at 500. Therefore, section

408(d)(3) does not apply and the $17,832 petitioner withdrew

from his Fidelity IRA must be included in gross income

under section 408(d)(1).

Any contention we have not addressed is irrelevant, moot,

or meritless.

To reflect the foregoing,

Decision will be entered for respondent.

Reviewed by the Court.

THORNTON, COLVIN, GALE, GOEKE, PARIS, LAUBER, and

NEGA, JJ., agree with this opinion of the Court.

VASQUEZ, J., concurring: I concur with the opinion of the

Court’s holding that petitioner’s payment to the Civil Service

Retirement System (CSRS) was not a rollover. I write sepa-

rately to emphasize that this case can be resolved solely on

(224) BOHNER v. COMMISSIONER 231

the basis of the Office of Personnel Management’s (OPM)

authority to choose whether to accept rollovers. I also take

this opportunity to address Judge Buch’s dissent.

I agree with the facts as laid out by the opinion of the

Court. OPM gave petitioner an opportunity to make a pay-

ment to CSRS in order to increase his annuity, as provided

by 5 C.F.R. sec. 831.303(b) (2001). See op. Ct. p. 225. Within

a two-month period, petitioner borrowed money from a

friend, made a withdrawal from his Fidelity Investments

individual retirement account (IRA), made the payment,

made a second withdrawal from the same IRA, and repaid

his friend. See id. The only question before us is whether one

or both of the withdrawals from the IRA were rollover con-

tributions to CSRS under section 408(d)(3).

As the opinion of the Court recognizes, CSRS is a quali-

fied trust. See id. p. 228 and note 1. OPM admin-

isters CSRS. 5 U.S.C. sec. 8347(a) (2006); see also 5 C.F.R.

sec. 838.101(a)(1) (2001) (‘‘[T]he Civil Service Retirement

System * * * [is] administered by the Office of Personnel

Management[.]’’). OPM’s policy is to not accept rollovers to

CSRS. See op. Ct. p. 230. Petitioner has failed to provide any

authority requiring OPM to accept rollovers, and OPM did

not treat petitioner’s payment as a rollover. These are the

only facts necessary to decide the issue before us.

‘‘A trustee * * * has broad powers that are only ‘limited by

statute or the terms of the trust’ ’’. Dabney v. Commissioner,

T.C. Memo. 2014–108, at *10 (quoting 3 Restatement, Trusts

3d, sec. 85 (2007)). In Dabney, the taxpayer attempted to

invest in real property through an IRA he held with Charles

Schwab & Co., Inc. (Charles Schwab). Id. at *3. The Internal

Revenue Code does not prohibit IRAs from holding real

estate. Id. at *10. However, Charles Schwab did not permit

IRAs to purchase or hold real property. Id. at *3. We held

that, because it was the trustee or custodian of the IRA,

Charles Schwab’s policies controlled and the taxpayer would

not have been able to use his Charles Schwab IRA to hold

the real property regardless of how he had structured the

transaction. Id. at *11–*12.

The same analysis holds true here. As the administrator of

CSRS, OPM may choose whether to accept rollover contribu-

tions to CSRS. No statute or regulation restricts OPM’s

authority to do so. OPM chose not to accept rollovers. There-

232 143 UNITED STATES TAX COURT REPORTS (224)

fore, petitioner’s payment to CSRS was not a rollover con-

tribution.

In his dissent, Judge Buch raises the issue of the plain lan-

guage of section 408(d)(3). The Supreme Court has stated:

There is, of course, no more persuasive evidence of the purpose of a

statute than the words by which the legislature undertook to give

expression to its wishes. Often these words are sufficient in and of them-

selves to determine the purpose of the legislation. * * * Frequently,

however, even when the plain meaning did not produce absurd results

but merely an unreasonable one ‘‘plainly at variance with the policy of

the legislation as a whole’’ this Court has followed that purpose, rather

than the literal words. * * * [United States v. Am. Trucking Ass’ns, Inc.,

310 U.S. 534, 543, 544 (1940); fn. refs. omitted.; quoting Ozawa v. United

States, 260 U.S. 178, 194 (1922).]

Under Judge Buch’s reading of the statute, neither CSRS

nor any other qualified plan or trust has the discretion to

choose whether to accept rollover contributions. I do not

believe that such an approach is reasonable or in keeping

with Congress’ intent. See H.R. Rept. No. 107–51 (Part 1), at

81 (2001) (‘‘Qualified plans are not required to accept roll-

overs.’’). The term ‘‘qualified plan’’ refers to ‘‘a plan which

satisfies the requirements of section 401(a).’’ Sec. 1.401–

0(b)(1), Income Tax Regs. As the opinion of the Court states:

‘‘CSRS is a plan that meets the requirements of sec. 401(a).’’

See op. Ct. p. 228 note 1. Qualified plans have the discretion

to decide whether to accept rollover contributions, and OPM

exercised that discretion. No further analysis is required.

LAUBER, J., agrees with this concurring opinion.

HALPERN, J., dissenting: I join Judge Buch’s dissent and

write separately to explain why the second distribution fails.

It fails under the statutory definition of a rollover. Mr.

Bohner made his payment into CSRS on April 27, 2010,

before he received the second distribution on May 3, 2010.

Section 408(d)(3)(A) requires that the amount received as a

distribution be paid into the eligible retirement plan no later

than 60 days after distribution. A distribution cannot be

rolled over before it is received. Judge Buch may not have

included that reason because some joining his side opinion

may have objected that that ground was not raised by

respondent. That is not necessarily a valid objection.

(224) BOHNER v. COMMISSIONER 233

A deficiency determination may be sustained upon any

legal ground that supports it, even though the grounds relied

upon by the Commissioner may have been different or

unsound. Blansett v. United States, 283 F.2d 474, 478 (8th

Cir. 1960); Metrocorp, Inc. v. Commissioner, 116 T.C. 211,

232 (2001); Smith v. Commissioner, 56 T.C. 263, 291 n.17

(1971); Wilkes-Barre Carriage Co. v. Commissioner, 39 T.C.

839, 845–846 (1963), aff ’d, 332 F.2d 421 (2d Cir. 1964); Wil-

liams v. Commissioner, T.C. Memo. 1997–326. As we said in

Barnette v. Commissioner, T.C. Memo. 1992–595, aff ’d with-

out published opinion sub nom. Allied Mgmt. Corp. v.

Commissioner, 41 F.3d 667 (11th Cir. 1994):

It is the Court’s right and obligation to decide the case upon what it con-

siders to be the correct application of the law, based upon the record pre-

sented, whether the parties have properly pleaded the controlling issues

or not. * * * [I]f the Court feels that a full and fair opportunity to

present the facts has been given, and the Court feels that no further

briefing on the law is necessary, the Court can go forward and decide

the case on the record presented.

We have sufficient facts to permit us to determine that the

second distribution fails under the statutory definition of a

rollover because it could not be rolled over before it was

received, and I believe that we are obligated to so conclude.

HOLMES and BUCH, JJ., agree with this dissent.

BUCH, J., dissenting: The opinion of the Court turns on the

question of whether CSRS accepts rollovers, yet in that

opinion a majority of the Court candidly states that ‘‘there is

no specific provision in the Internal Revenue Code con-

cerning whether a qualified trust must accept a rollover that

is an indirect transfer from an IRA in order to constitute an

eligible retirement plan for purposes of section 408(d)(3)’’. See

op. Ct. p. 228. They then go on to create such a rule.

This may or may not be a good or wise rule, but that

should be irrelevant. It is not our role to act as rulemaker.

Indeed, on the same day the Court Conference considered

this Opinion, the Court of Appeals for the D.C. Circuit made

this very point: ‘‘The Tax Court is in the business of inter-

preting and applying the internal revenue laws, see Freytag,

501 U.S. at 891, not in the business of making those laws.’’

234 143 UNITED STATES TAX COURT REPORTS (224)

Kuretski v. Commissioner, 755 F.3d 929, 943 (D.C. Cir. 2014),

aff ’g T.C. Memo. 2012–262. After noting what the statute

says (and does not say), we are to apply what is written. The

Court of Appeals for the Eleventh Circuit (where an appeal

of this case could be taken) reminded us of that earlier this

year: ‘‘The ‘preeminent canon of statutory interpretation’

requires the court to ‘presume that the legislature says in a

statute what it means and means in a statute what it says

there.’ ’’ Packard v. Commissioner, 746 F.3d 1219, 1222 (11th

Cir. 2014) (quoting Bed Rock, Ltd., LLC v. United States, 541

U.S. 176, 183 (2004)), rev’g 139 T.C. 390 (2012).

Indeed, over the years circuit after circuit has had occasion

to remind us of this point. See Textron, Inc. v. Commissioner,

336 F.3d 26, 32 (1st Cir. 2003) (‘‘Statutory language ‘is the

most persuasive evidence of the statutory purpose’ and

should not have been avoided by the Tax Court in this case.’’

(quoting Woodral v. Commissioner, 112 T.C. 19, 22 (1999))),

rev’g 115 T.C. 104 (2000); Estate of Swan v. Commissioner,

247 F.2d 144 (2d Cir. 1957) (reversing the Tax Court for

failing to apply the plain meaning of the statute), aff ’g in

part, rev’g in part 24 T.C. 829 (1955); Zackim v. Commis-

sioner, 887 F.2d 455 (3d Cir. 1989) (reversing the Tax Court

for looking beyond the statute to a Senate report when the

language of the statute is clear), rev’g 91 T.C. 1001 (1988);

Hillman v. IRS, 263 F.3d 338, 342–343 (4th Cir. 2001)

(holding that the plain meaning rule applies unless the lit-

eral application of the statute ‘‘produces an outcome that is

demonstrably at odds with clearly expressed congressional

intent to the contrary’’ or when literal application of the

statute ‘‘produces an absurd result’’), rev’g 114 T.C. 103

(2000); Estate of Monroe v. Commissioner, 124 F.3d 699 (5th

Cir. 1997) (holding that the Tax Court incorrectly applied the

law when it interpreted a statute in a way that conflicts with

the statutory language), rev’g 104 T.C. 352 (1995); Limited,

Inc. v. Commissioner, 286 F.3d 324, 336 (6th Cir. 2002) (‘‘[I]t

is not the Tax Court’s role to inject its own policy determina-

tions into the plain language of statutes.’’), rev’g 113 T.C. 169

(1999); De Soto Sec. Co. v. Commissioner, 235 F.2d 409, 411

(7th Cir. 1956) (‘‘The courts can only interpret congressional

acts. They cannot legislate.’’), rev’g 25 T.C. 175 (1955); Estate

of Farnam v. Commissioner, 583 F.3d 581 (8th Cir. 2009)

(holding that when the language of the statute is plain and

(224) BOHNER v. COMMISSIONER 235

unambiguous, there is no need to look to policy consider-

ations), aff ’g 130 T.C. 34 (2008); Easson v. Commissioner,

294 F.2d 653, 657 (9th Cir. 1961) (reversing the Tax Court

for ‘‘failing to adhere to the unambiguous language contained

in the statutes in question’’), rev’g 33 T.C. 963 (1960); Haw-

kins v. Commissioner, 86 F.3d 982, 989 (10th Cir. 1996)

(holding that the Tax Court’s interpretation of the statute

was ‘‘unduly narrow’’ and ran counter to the plain meaning

of the statute), rev’g 102 T.C. 61 (1994); Matthews v.

Commissioner, 907 F.2d 1173, 1179 (D.C. Cir. 1990) (holding

that the language of the statute is ‘‘too plain to be mis-

taken’’), aff ’g 92 T.C. 351 (1989).

And the Supreme Court has reminded us. Badaracco v.

Commissioner, 464 U.S. 386, 398 (1984) (affirming the Court

of Appeals for the Third Circuit’s reversal of the Tax Court

and stating that ‘‘[c]ourts are not authorized to rewrite a

statute because they might deem its effects susceptible of

improvement’’), aff ’g 693 F.2d 298 (3d Cir. 1982).

We have acknowledged this point, as well. See Belk v.

Commissioner, 140 T.C. 1, 10 (2013) (‘‘When the plain lan-

guage of the statute is clear and unambiguous, that is where

the inquiry should end.’’). We often make this point in apolo-

getic tones when denying a taxpayer a tax benefit not clearly

contemplated by the Internal Revenue Code. See, e.g.,

Eichelburg v. Commissioner, T.C. Memo. 2013–269 at *7–*8

(‘‘We acknowledge that the result we reach may seem harsh.

* * * However, this Court may not rely on general equitable

principles to expand the statutorily prescribed time for filing

a petition.’’ (Citations omitted.)); Cutler v. Commissioner,

T.C. Memo. 2013–119, at *34 (‘‘While we sympathize with

her children, we must apply the law as written; it is up to

Congress to address questions of fairness and to make

improvements to the law.’’); Moody v. Commissioner, T.C.

Memo. 2012–268, at *8 (‘‘We are sympathetic to petitioner’s

plight; however, we are bound by the statute as written and

the accompanying regulations when consistent therewith.’’);

Ball v. Commissioner, T.C. Memo. 1995–520, slip op. at 13

(‘‘While the result to petitioner may seem harsh, we cannot

ignore the plain language of the statute and, in effect,

rewrite the statute to achieve what might be an equitable

result.’’).

236 143 UNITED STATES TAX COURT REPORTS (224)

So with that, I would look to the law as written and apply

it to the material facts, which are fairly straightforward. Mr.

Bohner worked for the Social Security Administration and

participated in the CSRS during his years of service. After

Mr. Bohner retired, he received a letter from OPM explaining

that he could increase his CSRS retirement annuity by

remitting $17,832 to make up for years when he did not have

retirement contributions withheld. The letter required the

amount to be paid within 15 days. The letter was silent as

to whether that payment could be made through an indirect

rollover. 1

During 2010 Mr. Bohner maintained an IRA with Fidelity

Investments. Mr. Bohner made two requests for distributions

from his IRA. Here, the chronology becomes important.

Fidelity made a first distribution of $5,000 on April 15, 2010,

withholding $500 of Federal income tax. Mr. Bohner then

borrowed money from a friend and mailed a check for the full

$17,832 to OPM for payment into CSRS on April 27, 2010.

Fidelity then made a second distribution of $12,832 on May

3, 2010. Mr. Bohner used these funds to reimburse his friend

and replenish his bank account.

The question for us to decide under the arguments prop-

erly preserved by the parties is whether Mr. Bohner made

valid rollovers. 2

The relevant statute is section 408(d). To begin, an IRA

distribution is taxable as provided under section 72. Sec.

408(d)(1). However, that distribution is not taxable if it is a

rollover. Sec. 408(d)(3)(A). That section sets forth the require-

ments of a rollover as follows:

Paragraph (1) [providing that distributions are taxable] does not apply

to any amount paid or distributed out of an individual retirement

account or individual retirement annuity to the individual for whose

benefit the account or annuity is maintained if—

* * * * * * *

(ii) the entire amount received (including money and any other prop-

erty) is paid into an eligible retirement plan for the benefit of such

individual not later than the 60th day after the date on which the pay-

1 Such a statement would not affect the outcome the opinion of the Court

reaches, and whether any such statement would affect the outcome under

the analysis in this dissent is not an issue before us.

2 See op. Ct. p. 228 and note 2.

(224) BOHNER v. COMMISSIONER 237

ment or distribution is received, except that the maximum amount

which may be paid into such plan may not exceed the portion of the

amount received which is includible in gross income (determined with-

out regard to this paragraph).

CSRS is an ‘‘eligible retirement plan’’. Through a series of

cross-references, a qualified trust is an eligible retirement

plan. See secs. 408(d)(3) (flush language), 402(c)(8)(B). In

Rev. Rul. 58–472, 1958–2 C.B. 30, the IRS held that CSRS,

which was first created by the Civil Service Retirement Act

of 1920, Pub. L. No. 66–215, 41 Stat. 614, is a qualified trust

under section 401(a). Although revenue rulings are not

binding on the Court, they may serve to bind the Commis-

sioner where a longstanding revenue ruling that has not

been modified or revoked is relevant to the case before us.

Rauenhorst v. Commissioner, 119 T.C. 157, 173 (2002). The

IRS has not revoked this revenue ruling, and respondent did

not challenge CSRS’ status as a qualified trust here. Accord-

ingly, CSRS is a qualified trust and therefore an eligible

retirement plan.

So we must see whether either of the two distributions

qualifies as a rollover. The opinion of the Court denies roll-

over treatment for both distributions in one fell swoop.

Like the facts, the law is fairly straightforward. The

requirements for a distribution to be treated as a rollover are

found in section 408(d)(3)(A)(ii). A distribution from an IRA

will not be included in gross income if the entire amount

received from the IRA is paid into an eligible retirement plan

no later than 60 days after the date the payment is received.

Mr. Bohner received the first distribution on April 15, 2010.

Twelve days later, Mr. Bohner wrote a check exceeding the

amount of the distribution to OPM for payment into CSRS.

Accordingly, he fulfilled all of the requirements for a rollover

contribution under section 408(d)(3)(A)(ii), and the first dis-

tribution should not be included in his gross income.

The opinion of the Court makes it abundantly clear that

there is no rule that overrides the rollover treatment allowed

under section 408. The opinion cites section 401(a)(31), which

relates to the qualification of a plan, not the tax treatment

of a rollover. 3 The opinion cites section 402, which relates to

3 Both the opinion of the Court and respondent cite a regulation for the

Continued

238 143 UNITED STATES TAX COURT REPORTS (224)

rollovers from exempt trusts, not rollovers from IRAs. In fact,

the opinion does not cite any specific provision in section 402

but rather cites the legislative history of 1992 amendments

to section 402.

In looking to analogous provisions to assist in interpreting

section 408, the opinion of the Court has done the exact

opposite of what canons of statutory construction instruct.

Canons of statutory construction encourage courts to look to

analogous provisions when resolving ambiguity in the provi-

sion under consideration. Atl. Cleaners & Dyers, Inc. v.

United States, 286 U.S. 427, 433 (1932) (‘‘Undoubtedly, there

is a natural presumption that identical words used in dif-

ferent parts of the same act are intended to have the same

meaning.’’). Where one provision contains a specific rule and

another is silent, canons of statutory construction tell us that

the omission is intentional. Rand v. Commissioner, 141 T.C.

376, 390–391 (2013). And we should interpret the provision

consistent with the omission; we do not add a rule to the

statute that Congress did not itself include.

The strongest statutory authority the opinion of the Court

can muster is the statement ‘‘[t]he statutory provisions gov-

erning CSRS do not include a provision allowing pretax

employee contributions.’’ See op. Ct. p. 226. But the statutory

framework of CSRS also does not include a provision prohib-

iting pretax employee contributions. A review of that statu-

tory framework reveals that it is silent on the subject of its

Federal income tax treatment. 5 U.S.C. secs. 8331–8351

(2006). The only tax-related provisions within CSRS’s gov-

erning statutes relate to State taxes and withholding. Id. sec.

8345(k).

The provisions governing the tax treatment of CSRS dis-

tributions and rollovers into the CSRS are (unsurprisingly)

found in title 26, the Internal Revenue Code. Section

408(d)(3) governs rollovers from an IRA. That provision tells

us that a rollover distribution is to be treated as income on

the contract when contributed to the new plan. Sec.

408(d)(3)(H)(ii)(II). If treated properly, that amount would be

proposition that eligible retirement plans are not required to accept roll-

overs. Sec. 1.401(a)(31)–1, Q&A–13, Income Tax Regs. The regulation is ir-

relevant because it not only addresses the qualification requirements for

a plan (an issue not before us); it also relates to accepting direct rollovers,

which are not at issue here.

(224) BOHNER v. COMMISSIONER 239

taxable when paid out by CSRS. Sec. 72(b) (because it is not

treated as an investment in the contract, it is not part of the

amount that is excluded from income).

The opinion of the Court seems intent on solving a problem

that does not exist. The statutory scheme places no weight

on whether CSRS has a practice of accepting rollover con-

tributions. Indeed, the statute places no weight on a plan’s

preferences regarding accepting rollovers when determining

the taxability of a rollover distribution. The Internal Revenue

Code, however, would tax that rollover when it comes out of

CSRS. If CSRS does not properly account for that (a fact that

is not in the record), then that is a problem for those who

administer CSRS to resolve, not the Court.

The concurring opinion cites Dabney v. Commissioner, T.C.

Memo. 2014–108, for the proposition that the trustee or

custodian of a plan can restrict the types of investments the

plan will allow, even when the statute would otherwise

permit the investment. See concurring op. p. 231. Dabney is

inapposite because the question presented to the Court was

whether the distribution at issue was either an investment

by Mr. Dabney’s IRA or a transfer between IRA trustees. Mr.

Dabney did not intend or attempt to make a rollover con-

tribution under section 408(d)(3) from one retirement account

to another; rather, Mr. Dabney attempted to change the

investments within his IRA in violation of the trustee’s

internal policies. Mr. Dabney claimed that he acquired an

investment in real property as agent for the IRA trustee;

however, he could not act as agent for the trustee where the

trustee had a policy against investing in real property. Our

approval of the IRA trustee’s right to restrict the investment

of IRA funds is not authority for the proposition that an

otherwise qualified recipient of an IRA rollover contribution

may, through its internal policies, cause the contribution not

to qualify as such. Thus the analysis in Dabney has no

bearing on the case before us.

On the basis of the foregoing, the first distribution fulfills

the necessary requirements for a rollover contribution. As for

the second of the two Fidelity distributions, that distribution

may fail to qualify as a rollover for reasons not addressed

here.

240 143 UNITED STATES TAX COURT REPORTS (224)

Because Mr. Bohner complied with all the necessary steps

to make a rollover contribution as to the first distribution, I

dissent.

HALPERN, FOLEY, HOLMES, GUSTAFSON, and MORRISON,

JJ., agree with this dissent.

f