BEFORE THE UTAH STATE TAX COMMISSION
: FINDINGS OF FACT,
Petitioners, ) CONCLUSIONS OF LAW,
: AND FINAL DECISION
OPERATION DIVISION OF THE )
UTAH STATE TAX COMMISSION, : Appeal No. 92-1386
Respondent. : Account No. XXXXX
STATEMENT OF CASE
This matter came before the Utah State Tax Commission for a formal hearing on XXXXX and again on XXXXX. Lisa L. Olpin, Presiding Officer, heard the matter for and on behalf of the Commission. Present and representing Petitioners was XXXXX. Present and representing Respondent was XXXXX, Assistant Utah Attorney General.
Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:
FINDINGS OF FACT
1. The tax in question is personal income tax.
2. The year in question is XXXXX.
3. Prior to the hearing, the parties reached a stipulated agreement, its terms of which are incorporated in the Stipulation of Facts and attached hereto.
4. Additionally, at the hearing, Mr. XXXXX testified that he was working for the XXXXX in New Jersey in the early 1980's when he elected to take early retirement.
5. Up until the time of retirement, XXXXX had been depositing money into Petitioner's retirement account set up by XXXXX at XXXXX, matching Petitioner's contributions.
6. When Mr. XXXXX left XXXXX, he withdrew some of his retirement funds from this account, leaving a balance.
7. Mr. XXXXX withdrew money as he needed it in succeeding years.
8. Both Mr. XXXXX and Respondent agree that Mr. XXXXX did not rollover his retirement funds or set up an annuity or pension of any sort after he left XXXXX.
9. Mrs. XXXXX took a lump sum distribution from her retirement plan when she left employment with the XXXXX in XXXXX. She also withdrew funds from her 401(k) plan.
10. Mr. XXXXX testified that a certified public accountant prepared Petitioners' tax return for XXXXX.
11. Mr. XXXXX understood that the lump sum distributions he and his wife had taken were not taxable since they were designated retirement income.
12. The Operations Division contends that the lump sum distributions are taxable to Utah. Petitioners were penalized $$$$$ for underpayment of the tax amount owing for XXXXX, $50.00 for failing to pay in full within ninety (90) days of the deficiency notice and $10.00 in legal fees. Interest was also added.
CONCLUSIONS OF LAW
Pertinent Utah law states the following:
There shall be added
to federal taxable income of a resident or nonresident individual: (b) a lump
sum distribution allowable as a deduction under Section 402 (e)(3) of the
Internal Revenue Code, to the extent deductible under Section 62 (a)(8) of the
Internal Revenue Code in determining federal adjusted gross income; . . . (Utah
Code Ann. §59-10-114(1)(b).)
Further, Utah Code Ann. §59-10-114(2)(d) states:
There shall be
subtracted from federal taxable income of a resident or non resident
individual: (d) amounts received by taxpayers under age 65 as "retirement
income" which, for purposes of this section, means pensions and annuities,
paid from an annuity contract purchased by an employer under a plan which meets
the requirements of Section 404(a)(2) of the Internal Revenue Code, or
purchased by an employee under a plan which meets the requirements of Section
408 of the Internal Revenue Code, or paid by the United States, a state, or
political subdivision thereof, or the District of Columbia, to the employee
involved or the surviving spouse; . . .
(3)(a) For purposes of
Subsection (2)(d), the amount of "retirement income" subtracted for
taxpayers under 65 shall be the lesser of the amount included in federal
taxable income, or $4,800, except that: . . .
DECISION AND ORDER
Based upon the foregoing, the Tax Commission finds that both Mr. XXXXX's and Mrs. XXXXX's lump sum distributions are taxable to Utah.
The analysis of the facts of this case is as follows: Petitioners, both under age 65 years, withdrew in lump sum amounts from their separate retirement plans. At that point, the lump sum distributions are considered fully taxable unless Petitioners rollover their distributions into qualifying tax exempt accounts or set up an annuities with scheduled periodic payments. If Petitioners had rolled over their distributions or set up annuities, they would have been entitled to the individual $4,800 exemptions described earlier.
In this matter, Petitioners have conceded and have provided testimony showing that they did not rollover their lump sum distributions or set up annuities with their lump sum distributions.
The Tax Commission finds that Petitioners' XXXXX lump sum distributions are fully taxable to Utah. The penalty amounts are waived. The interest assessment and legal fee remain. It is so ordered.
DATED this 10th day of June, 1993.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Joe B. Pacheco S. Blaine Willes