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
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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.
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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).