T.C. Memo. 1996-278
UNITED STATES TAX COURT
DONALD G. RUSSELL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12946-95. Filed June 17, 1996.
Donald G. Russell, pro se.
Gary W. Bornholdt, for respondent.
MEMORANDUM OPINION
COUVILLION, Special Trial Judge: This case was heard
pursuant to section 7443A(b)(3)1 and Rules 180, 181, and 182.
Respondent determined a deficiency in petitioner's 1992
Federal income tax in the amount of $279.
The sole issue for decision is whether unemployment benefits
received by petitioner during the year at issue constitute
1
Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year at issue. All Rule
references are to the Tax Court Rules of Practice and Procedure.
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"compensation" for purposes of calculating the allowable
deduction for a contribution to an Individual Retirement Account
(IRA) under section 219(b).2
Some of the facts have been stipulated, and those facts,
with the annexed exhibits, are so found and are incorporated
herein by reference. At the time the petition was filed,
petitioner's legal residence was Northport, New York.
During 1992, petitioner earned $306.26 in taxable wages,
$299.36 in taxable interest, $106 for jury duty service, and
received $10,660 in unemployment compensation. Petitioner
properly reported all of this income on his 1992 Federal income
tax return (return).
Petitioner contributed $2,000 to an IRA in 1992 and claimed
a contribution deduction for this amount on his 1992 return. In
the notice of deficiency, respondent disallowed $1,694 of
petitioner's IRA contribution deduction, the amount by which the
deduction exceeded his taxable wages of $306.26.
In calculating the amount of the contribution deduction,
petitioner considered the unemployment benefits he received in
1992 to be "compensation", as that term is used in section
219(b)(1)(B). Respondent contends that unemployment benefits do
2
In the notice of deficiency, respondent made adjustments to
petitioner's medical and miscellaneous expense deductions. These
adjustments are computational and will be resolved by the Court's
holding on the issue in this case.
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not constitute "compensation" for purposes of section
219(b)(1)(B). Respondent relies on section 1.219(a)-1(b)(3),
Proposed Income Tax Regs., 49 Fed. Reg. 2795 (Jan. 23, 1984),
which expressly excludes unemployment compensation within the
meaning of section 85 as "compensation" for purposes of section
219.
Deductions are a matter of legislative grace, and the
taxpayer bears the burden of proving his entitlement to the
claimed deduction. New Colonial Ice Co. v. Helvering, 292 U.S.
435, 440 (1934).
Section 219(b) allows a deduction for qualified retirement
contributions in "an amount equal to the compensation includable
in the individual's gross income", to a maximum of $2,000.
Section 219(f)(1) defines "compensation" as including earned
income received by a self-employed individual; however, the term
does not include any amount received as a pension or annuity, and
does not include any amount received as deferred compensation.
Unemployment compensation is defined under section 85(b) as
"any amount received under a law of the United States or of a
State which is in the nature of unemployment compensation."
Section 1.85-1(b)(1)(i), Income Tax Regs., further explains that
the amount of the payments is usually based upon length of prior
employment and prior wages.
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The unemployment compensation benefits petitioner received
were paid to him by a Federal or State agency, not for any work
or personal services performed by petitioner, but particularly
and solely because of petitioner's lack of employment and
inability to earn salary or wages due to the lack of employment
opportunities. Section 1.219-1(c)(1), Income Tax Regs., provides
in pertinent part that the term "compensation" means wages,
salaries, professional fees, or other amounts derived from or
received for personal services actually rendered. Petitioner's
unemployment compensation benefits were not paid to him for
personal services actually rendered. Accordingly, the Court
holds that unemployment compensation benefits, since such
benefits are not paid for personal services actually rendered,
does not constitute "compensation" within the intent and meaning
of section 219(b)(1)(B). Thus, petitioner's allowable IRA
contribution deduction for the year in issue is limited to
$306.26, the amount of his taxable wages during 1992.
At trial, petitioner referred the Court to the Internal
Revenue Service (IRS) 1990 instruction booklet for Form 1040 and
the following statement in that booklet on which he relied in
considering his unemployment compensation benefits as
"compensation" for purposes of his IRA contribution: "NOTE:
Supplemental unemployment benefits received from a company-
financed supplemental unemployment benefit fund are wages.
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Report them on Line 7." The Court first notes that petitioner
did not receive his unemployment benefits "from a company-
financed supplemental unemployment benefit fund". Therefore, the
statement from the booklet is not applicable to petitioner.
However, even if the booklet had provided erroneous information,
the law is well settled that authoritative tax law is contained
in statutes, regulations, and judicial decisions and not in
informal publications. Zimmerman v. Commissioner, 71 T.C. 367,
371 (1978), affd. without published opinion 614 F.2d 1294 (2d
Cir. 1979); Green v. Commissioner, 59 T.C. 456, 458 (1972).
Publications by the IRS, like the one on which petitioner relied,
are merely guides published by the IRS to aid taxpayers. Dixon
v. United States, 381 U.S. 68, 73 (1965). The Court, however,
does not conclude that the statement relied on by petitioner was
erroneous; petitioner merely misconstrued its meaning.
Decision will be entered
for respondent.