PLOSS v. COMMISSIONER

T.C. Summary Opinion 2002-133

UNITED STATES TAX COURT

THOMAS H. PLOSS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 1217-01S. Filed October 10, 2002.

Thomas H. Ploss, pro se.

David S. Weiner, for respondent.

DINAN, 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. The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority. Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in
 - 2 -

effect for the year in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.

Respondent determined a deficiency in petitioner’s Federal

income tax of $2,226 for the taxable year 1998.

The issue for decision is whether petitioner must include

certain retirement annuity payments in gross income.1

Some of the facts have been stipulated and are so found.

The stipulations of fact and the attached exhibits are

incorporated herein by this reference. Petitioner resided in

Wilmette, Illinois, on the date the petition was filed in this

case.

Petitioner is an attorney and administrative law judge. He

was employed by the Chicago, Milwaukee, St. Paul, and Pacific

Railroad Company (Milwaukee Road) from 1966 until 1980, when his

employment was terminated due to the company’s bankruptcy. As a

result of his employment at Milwaukee Road, petitioner became

vested in benefits in the form of an annuity payable upon

retirement. After petitioner’s employment was terminated in

1
Respondent also determined that petitioner received
unreported tier 1 railroad retirement benefits, which for Federal
tax purposes are treated in the same manner as Social Security
benefits. Sec. 86(d)(1)(B). The parties agree that petitioner
received $5,151 of such benefits in 1998, and that they were
reported on petitioner’s tax return, but that they were reported
as pension or annuity income rather than as Social Security
benefits. The portion of these benefits which is correctly
includable in gross income pursuant to sec. 86(a) is
computational and will be determined by our holding on the issue
in this case.
 - 3 -

1980, Milwaukee Road was merged into the Soo Line Railroad

Company (Soo Line), and the Soo Line pension plan became the

successor of the Milwaukee Road pension plan. In 1995,

petitioner applied for retirement benefits in the form of an

annuity from the Soo Line pension plan, and in the year in issue

petitioner received $2,807 in benefits therefrom.

On his 1998 Federal income tax return, petitioner did not

report any of the benefits received from the Soo Line pension

fund. In the statutory notice of deficiency, respondent

determined that petitioner had unreported pension or annuity

income.2

Gross income generally includes income from whatever source

derived, including income from pensions and annuities. Sec.

61(a)(9), (11); sec. 72(a). However, gross income does not

include “that part of any amount received as an annuity under an

annuity * * * contract which bears the same ratio to such amount

as the investment in the contract * * * bears to the expected

return under the contract”. Sec. 72(b)(1); see also sec. 72(d).

Petitioner argues that no portion of the pension

distributions he received in 1998 should be taxable because the

benefits “were funded by contributions made by deductions from

2
The notice of deficiency states in one instance that the
total pension and annuity income received by petitioner in 1998
was $3,677 and then states in another instance that it was
$2,807. We accept the parties’ stipulation that petitioner
received total distributions of $2,807.
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previously taxed earnings of petitioner.” Petitioner, however,

provides no evidence to support this assertion other than

language used by Milwaukee Road in a 1981 document to the effect

that petitioner had vested in certain pension benefits.

Petitioner argues that the use of the term “vested” implies that

he made contributions to the plan. However, the use of this term

carries no such implication. See, e.g., sec. 411(a)(2) (minimum

vesting requirements for contributions made by an employer on

behalf of an employee under a qualified plan).

Petitioner asserts that, because the alleged contributions

to the retirement plan were made with funds which had already

been taxed, none of the benefits he now receives from the

retirement plan should be subject to further taxation. However,

petitioner cites, and we find, no authority for this proposition.

Assuming arguendo that petitioner in fact made contributions

to the pension plan, petitioner may have been entitled to exclude

that portion of the benefits he received which represents a

ratable portion of his investment in the pension annuity. Sec.

72(b), (d). The excluded amount typically would have been a

portion of the benefits he received in any given year and not, as

petitioner argues, the entire amount of the benefits. Id.

However, petitioner has provided no evidence supporting his

assertion that he made any contributions, and we accordingly have
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no way of determining his investment, if any, in the annuity.3

Consequently, the full amount of the pension benefits is

includable in his income. Sec. 61(a)(9), (11); sec. 72(a).

Reviewed and adopted as the report of the Small Tax Case

Division.

To reflect the foregoing,

Decision will be entered

under Rule 155.

3
Sec. 7491(a) does not shift the burden of proof to
respondent in this case because petitioner has provided no
credible evidence with respect to his investment in the annuity.
Sec. 7491(a)(1).