- 5 -
In In re Cassidy, supra, the Court of Appeals held that, in
determining the priority of claims for bankruptcy purposes, the
section 72(t) additional tax constitutes a penalty that bears no
relationship to the direct financial loss of the Government and
is thereby punitive in nature. Accordingly, pursuant to the
bankruptcy laws, the Internal Revenue Service's claim against the
taxpayer for the payment of the section 72(t) additional tax was
ineligible for priority status, and the Internal Revenue Service,
therefore, was subordinated to the status of a general unsecured
creditor. Relying on In re Cassidy, supra, petitioner argues
that his "financial hardship circumstances and subsequent
premature withdrawals to pay outstanding debts constitute a
bankruptcy, and the early withdrawal penalty should be
subordinated in accordance with the equitable principles of the
Bankruptcy Code, thereby effectively relieving the penalty
assessment."
Petitioner's reliance on In re Cassidy, supra, is misplaced.
The Court of Appeals' holding was based strictly on bankruptcy
policy and was limited to determining the priority of claims in
bankruptcy proceedings. The holding is not applicable to this
case. Petitioner is not in a bankruptcy proceeding, and his case
before this Court is solely for the purpose of determining his
income tax liability. Moreover, the argument petitioner makes is
not even analogous to the question in this case as to whether the
Page: Previous 1 2 3 4 5 6 7 8 Next
Last modified: May 25, 2011