TaxProf Blog – Lesson From The Tax Court: The Tax Court Is Not Your Advocate (February 6, 2023)

February 6, 2023-Nicholas Ward

Bryan Camp has published an article on the TaxProf Blog, titled “Lesson From The Tax Court: The Tax Court Is Not Your Advocate” which discusses Robert B. Lucas v. Commissioner. The article begins as

Today I present two lessons.  First, we learn why diabetes is not a per se disability sufficient to avoid penalties for early 401(k) distributions.  Second, we learn that pro se litigants cannot rely on the Tax Court to consider potential arguments they could have raised, but did not.

Diabetes is a well-known and widespread disease, afflicting some 37.3 million people in the U.S., according to the CDC’s 2022 National Diabetes Statistics Report.  That’s just over 11% of the US population.  Medical complications abound, as detailed in this report from the Diabetes Institute Research Foundation.

Managing diabetes and its attendant complications can be difficult and expensive.  In recognition of that, Canada gives this tax credit to Canadians who must manage the disease.  And in the U.S., many of the costs associated with diabetes qualify for the medical expense deduction under §213.  See e.g. IRS Publication 502 (2021) at p. 7 (explaining that cost of blood sugar test kit for diabetes is a qualifying medical expense).

In Robert B. Lucas v. Commissioner, T.C. Memo. 2023-9 (Jan. 17, 2023) (Judge Urda), the unemployed taxpayer took an early distribution from his 401(k) plan to help make ends meet, which included helping to manage his diabetes.  The issue was whether he had to pay the §72(t) 10% penalty for early distributions.  He could avoid the entire penalty if his diabetes qualified as a disability, and he could avoid some of it if the distribution was used for expenses allowable as a §213 deduction.  As to the first, Judge Urda teaches us why diabetes is not, in and of itself, a disability sufficient to escape the 10% penalty.  As to the second, Judge Urda notes the issue but, because the taxpayer did not raise it, “[w]e accordingly deem the issue forfeited.”  Op. at 4.  In doing that, Judge Urda teaches an important lesson on the role of the Tax Court.

Click here to see the full article: “Lesson From The Tax Court: The Tax Court Is Not Your Advocate

Posted by Nicholas Ward, Intern, Wealth Strategies Journal

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