T.C. Memo. 2003-21
UNITED STATES TAX COURT
CHARLIE LAWS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13979-99. Filed January 22, 2003.
Charlie Laws, pro se.
Monica D. Armstrong, for respondent.
MEMORANDUM OPINION
PAJAK, Special Trial Judge: Respondent determined a
deficiency of $2,505 in petitioner’s Federal income tax for the
taxable year 1997. Unless otherwise indicated, section
references are to the Internal Revenue Code in effect for the
year in issue, and all Rule references are to the Tax Court Rules
of Practice and Procedure.
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This Court must decide (1) whether an amount received by
petitioner as a disability retirement annuity is includable in
gross income, and (2) whether Social Security payments received
by petitioner are includable in gross income.
Some of the facts in this case have been stipulated and are
so found. Petitioner resided in Atlanta, Georgia, at the time he
filed his petition.
Petitioner was born on February 7, 1913. Petitioner retired
in 1962. Petitioner timely filed his 1997 Federal income tax
return (1997 return). He reported adjusted gross income of
$14,375 on his 1997 return. This amount consisted solely of
interest income.
Attached to the 1997 return was a Form 1099R, Statement of
Annuity Paid, from the Office of Personnel Management Retirement
Programs, which indicated that petitioner received a gross
retirement annuity in the amount of $13,296 in 1997. This amount
was not reported on petitioner’s 1997 return. According to a
November 7, 1967, letter from the United States Civil Service
Commission, petitioner’s retirement annuity under the Civil
Service Retirement Act was based on his being declared totally
disabled from his position as Special Delivery Messenger, Post
Office Department. The nature of petitioner’s disability was
listed as industrial blindness.
Petitioner also received $8,241 of Social Security benefits
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in 1997. This amount was not reported on petitioner’s 1997
return.
Respondent determined that petitioner failed to report the
disability retirement annuity and a portion of his Social
Security benefits on his 1997 return.
Petitioner argues generally that the disability retirement
annuity is not taxable. In his words: “If I live above the
bridge, if I have to pay tax, let the man under the bridge pay
tax.” He asserts age discrimination in that he claims a 54 year
old does not have to pay tax whereas a 74 year old person must
pay tax. Petitioner does not cite any sections of the Internal
Revenue Code to support his position. We do not find any age
discrimination provisions in the applicable statutes cited below.
It is clear based on the record before us that the disability
retirement annuity is excludable from gross income only if the
requirements of section 104(a)(3) are met.
Section 61(a) provides that, except as otherwise provided by
law, gross income includes all income from whatever source
derived. Exclusions from income are a matter of legislative
grace and are construed narrowly. Commissioner v. Schleier, 515
U.S. 323, 328 (1995). Taxpayers generally bear the burden of
proving that they are entitled to exclude amounts claimed. Rule
142(a)(1); Welch v. Helvering, 290 U.S. 111 (1933). Petitioner
does not contend that the burden of proof is on respondent under
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section 7491.
Section 104(a)(3) excludes from gross income amounts
received by an employee "through accident or health insurance * *
* for personal injuries or sickness" except to the extent such
amounts are (A) attributable to contributions made by the
employer which were not includable in the gross income of the
employee, or (B) paid by the employer. Thus, petitioner may
exclude the disability payments under section 104(a)(3) if the
payments were attributable to contributions made by his employer
which were included in petitioner’s gross income. Sec.
104(a)(3). Similarly, petitioner may exclude disability payments
if he paid the premiums for the disability policy. Id. Section
105(a) is essentially the mirror image of section 104(a)(3), and,
subject to two exceptions not applicable in this case, includes
in the gross income of an employee amounts received through
accident or health insurance for personal injuries or sickness to
the extent such amounts are (A) attributable to contributions by
the employer which were not includable in the gross income of the
employee, or (B) are paid by the employer.
Petitioner failed to establish that the disability annuity
payment he received in 1997 was attributable solely to
contributions he made under the disability plan or that the
disability payments were not attributable in whole or part to
contributions by his employer. Miley v. Commissioner, T.C. Memo.
2002-236. Likewise, there is no evidence that the contributions
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from petitioner’s employer were included in petitioner’s income.
Id. Therefore, petitioner is not entitled to exclude the
disability retirement annuity from gross income under section
104(a)(3). Accordingly, we sustain respondent’s determination
that petitioner’s disability retirement annuity received in 1997
is includable in his gross income.
Respondent also contends that petitioner failed to include
in gross income a portion of the Social Security benefits he
received in 1997.
Section 86(a) requires the inclusion of a portion of Social
Security benefits in gross income when the sum of the recipient’s
modified adjusted gross income plus one-half of the Social
Security benefits exceeds certain threshold amounts. In the case
of a single taxpayer, when this sum exceeds $25,000, the lesser
of 50 percent of such excess or 50 percent of the Social Security
benefits received during the taxable year must be included in
gross income. Sec. 86(a)(1), (c)(1)(A). Under section 86,
modified adjusted gross income in general equals adjusted gross
income with adjustments not relevant here. Sec. 86(b)(2).
Petitioner had modified adjusted gross income in 1997 in
excess of $25,000. Therefore, a portion of his Social Security
benefits is taxable. Accordingly, we sustain respondent’s
determination that petitioner’s gross income includes a portion
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of the respective Social Security disability benefits he received
during the taxable year in issue.
To reflect the foregoing,
Decision will be entered
for respondent.