T .C . Summary Opinion 2007-165

T .C . Summary Opinion 2007-165

UNITED STATES TAX COUR T

JAMES G . AND ANITA M . FORRET, Petitioners v .

COMMISSIONER OF INTERNAL REVENUE, Responden t

Docket No . 4934-06S . Filed September 24, 2007 .

Tamara M . Skoglund , for petitioners .

Frederic J . Fernandez ,

George W . Bezold , and Mark J . Miller ,

for respondent .

GOLDBERG,

Special Trial Judge : This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time 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, subsequen t

SERVED SEP 2 4 2007

- 2 section references are to the Internal Revenue Code in effect for

the years in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure .

Respondent determined deficiencies in petitioners' Federal

income taxes for the years 2003 and 2004 in the amounts of $2,925

and $3,246, respectively . The issue for decision is whether

petitioners can deduct amounts deposited to a qualified simple

retirement account during the taxable years at issue . The

adjustments in the notice of deficiency to itemized deductions,

personal exemptions, and alternative minimum tax are

computational and will be resolved by the Court's holding in this

case .

Background

This case was submitted fully stipulated pursuant to Rul e

122 . The stipulation of facts and the attached exhibits are

incorporated herein by this reference . At the time the petition

was filed, petitioners resided in New Berlin, Wisconsin . Unless

otherwise indicated, all references to petitioner are to James

Forret .

During the years at issue, petitioner was an employee of

Total Lighting Sales, Inc . Total Lighting Sales, Inc .

established a qualified simple retirement account under section

408(p), commonly referred to as a SIMPLE IRA . Petitioner

deposited $9,000 and $10,500 to the SIMPLE IRA in 2003 and 2004,

- 3 respectively . Total Lighting Sales, Inc ., did not reduce

petitioner's salary to fund the deposits or make contributions on

his behalf . Instead, petitioner made the deposits using funds

drawn from his personal savings account .

On their joint 2003 and 2004 Federal income tax returns,

petitioners claimed deductions for the amounts deposited into the

SIMPLE IRA .' Respondent issued petitioners a notice of

deficiency in December 2005, disallowing the claimed deduction

for each year .

Discussion

In general, the Commissioner's determination set forth in

notice of deficiency is presumed correct . Rule 142(a)(1) ;

v . Helvering,

a

Welch

290 U .S . 111, 115 (1933) . In certain

circumstances, the burden of proof may shift to the Commissioner .

Sec . 7491(a)(1) ; Rule 142(a)(2) . Because the facts are not in

dispute, we decide this case without regard to the burden of

proof .

A SIMPLE IRA is a retirement plan for small employers . Sec .

408(p)(2)(C)(i) ; Notice 98-4, 1998-1 C .B . 269 . In general,

contributions made to a SIMPLE IRA plan are not included in an

employee's gross income . Sec . 402(h)(1), (k) ; Notice 98-4, Q&A

I-l, 1998-1 C .B . at 275 . Contributions can only be made under a

' Although petitioner deposited $10,500 to the SIMPLE IRA in

2004, petitioners claimed only a $9,315 deduction for that year .

- 4 qualified salary reduction arrangement . Sec . 408 (p)(1)(B) . As

is relevant here, a qualified salary reduction arrangement means

a written arrangement under which :

(i) an employee eligible to participate in the

arrangement may elect to have the employer make

payments-(I) as elective employer contributions to a simple

retirement account on behalf of the employee , o r

(II) to the employee directly in cash,

*

(iii) the employer is required to make a matching

contribution to the simple retirement account * * *,

and

(iv) no contributions may be made other than

contributions described in clause (i) or (iii) . [Sec .

408(p)(2)(A) emphasis added . ]

Thus, an eligible employee can participate in the SIMPLE IRA

plan by having a portion of his salary deferred and contributed

to the plan, or the employee can choose not to participate and

receive his salary in the form of cash . If an employee chooses

to participate in the plan, the only permissible contributions

are those made by the employer on behalf of the employee and the

employer's matching contributions . Sec . 408(p)(2)(A)(iv) . An

employee cannot deduct amounts that he deposits directly to a

SIMPLE IRA plan . Sec . 219(a) and (b)(4) .

Petitioners concede that their lump-sum deposits do not

constitute valid contributions within the meaning of section

408(p) . Petitioners argue, however, that "The tax implications

would have been the same had the contributions been made through

a salary deduction ." According to petitioners, this is because

contributions under a qualified salary reduction arrangement are

made before tax . Petitioners contend that by using after tax

money from petitioner's savings account and then deducting a

corresponding amount, the same result is achieved and "the IRS is

no worse off after this lump sum contribution than they would

have been had the money been withheld monthly from Petitioners

[sic] paychecks ." Petitioners argue that they should not be

penalized for making "an honest mistake" .

While we are not unsympathetic to petitioners' position,

such an equitable argument cannot overcome the plain'meaning of

the statute . See Eanes v . Commissioner , 85 T .C . 168, 171 (1985)

(citing Hildebrand v . Commissioner , 683 F .2d 57, 59 (3d Cir .

1982), affg . T .C . Memo . 1980-532) . As we have said in cases

involving other statutes whose application has resulted in

perceived unfairness, such issues are in the province of

Congress, and we are not authorized to rewrite the statute . See,

e .g .,

Kenseth v . Commissioner , 114 T .C . 399, 407-408 (2000),

affd . 259 F .3d 881 (7th Cir . 2001) (and cases cited thereat) ; see

also Commissioner v . McCoy , 484 U .S . 3, 7 (1987) ("The Tax Court

is a court of limited jurisdiction and lacks general equitable

powers") . Accordingly, respondent's determination is sustained .

To reflect the foregoing,

Decision will be entere d

for respondent .