T.C. Memo. 2003-337
UNITED STATES TAX COURT
RAMON J. AND SHEILA A. JEANMARIE, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7265-02. Filed December 15, 2003.
Ramon J. Jeanmarie and Sheila A. Jeanmarie, pro sese.
Catherine S. Tyson, Gerald Brantley, and T. Richard Sealy
III, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
VASQUEZ, Judge: Respondent determined a deficiency of
$2,010 in petitioners’ 1999 Federal income tax. Unless otherwise
indicated, all 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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The sole issue for decision is whether $13,380 petitioner
Ramon J. Jeanmarie (petitioner) received in 1999 from the Office
of Personnel Management (OPM) as disability benefits under the
Civil Service Retirement System (CSRS) is excludable from income
pursuant to section 104(a)(4).1
FINDINGS OF FACT
None of the facts have been stipulated. At the time they
filed the petition, petitioners resided in El Paso, Texas.
In 1976, petitioner enlisted in the United States Army
(Army). Prior to joining the Army, petitioner suffered from
urinary problems. He thought his urinary problems were corrected
before entering the Army; however, after entering the Army, his
symptoms returned.
Petitioner served in the Army until 1979. Petitioner
received an honorable discharge, not a medical discharge, from
the Army. Petitioner did not receive Veterans’ Administration
(VA) disability when he left the Army. Petitioner’s urinary
problems persisted after he left the Army.
After he left the Army, petitioner was employed as a civil
service employee of the United States Navy (Navy). In 1983,
petitioner’s employment with the Navy was terminated. Petitioner
“fought” his termination, and in 1987 he was reinstated.
1
At trial, respondent conceded the only other adjustment
contained in the notice of deficiency, $20 of interest income,
because it was de minimis.
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Immediately upon his return, the Navy submitted the paperwork for
petitioner’s retirement. In 1988, petitioner retired from the
Navy. Effective September 29, 1988, petitioner started receiving
a pension, disability benefits under CSRS, from OPM.
Sometime in the mid to late 1990s, petitioner applied for VA
disability. His application was denied.
During 1999, petitioner received $13,380 from OPM as
disability benefits under CSRS. OPM reported the distribution to
respondent on its Form 1099R, Statement of Annuity Paid. The
distribution code on the Form 1099R was listed as “3-DISABILITY”.
Petitioners did not report the $13,380 on their 1999 joint
Federal income tax return.
OPINION
Section 7491(a) places the burden of proof on the
Commissioner with regard to certain factual issues. Higbee v.
Commissioner, 116 T.C. 438, 440 (2001). Respondent concedes that
section 7491 is applicable to this case.
Respondent argues that petitioners have neither introduced
credible evidence, pursuant to section 7491(a)(1), nor satisfied
the prerequisites of section 7491(a)(2). H. Conf. Rept. 105-599,
at 240, 242 (1998), 1998-3 C.B. 747, 994, 996 (the burden is on
the taxpayer to show that he satisfied the prerequisites of
section 7491(a)(2)). On the instant record, we agree with
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respondent. We conclude that petitioners bear the burden of
proving that respondent’s determination is wrong.2 Rule 142(a).
As a general rule, the Internal Revenue Code imposes a tax
on the taxable income of every individual. Sec. 1. Section
61(a) specifies that, “Except as otherwise provided”, gross
income for purposes of calculating such taxable income means “all
income from whatever source derived”. The Supreme Court has long
reiterated the sweeping scope of section 61. Commissioner v.
Schleier, 515 U.S. 323, 327 (1995); Commissioner v. Glenshaw
Glass Co., 348 U.S. 426, 429-431 (1955); Banaitis v.
Commissioner, 340 F.3d 1074, 1079 (9th Cir. 2003), affg. in part
and revg. in part on another ground T.C. Memo. 2002-5. “Pensions
and retirement allowances paid either by the Government or by
private persons constitute gross income unless excluded by law.”
Sec. 1.61-11(a), Income Tax Regs.
Section 104, in contrast, provides an exception with respect
to compensation for injuries or sickness. Such exclusions from
gross income are construed narrowly. Commissioner v. Schleier,
supra at 328; United States v. Burke, 504 U.S. 229, 248 (1992)
(Souter, J., concurring in judgment); Banaitis v. Commissioner,
supra at 1079. Section 104 reads in pertinent part:
2
We note that our decision in this case would not change
if respondent bore the burden of proof.
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SEC. 104. COMPENSATION FOR INJURIES OR SICKNESS.
(a) In General.--Except in the case of amounts
attributable to (and not in excess of) deductions
allowed under section 213 (relating to medical, etc.,
expenses) for any prior taxable year, gross income does
not include--
* * * * * * *
(4) amounts received as a pension, annuity,
or similar allowance for personal injuries or
sickness resulting from active service in the
armed forces of any country or in the Coast and
Geodetic Survey or the Public Health Service, or
as a disability annuity payable under the
provisions of section 808 of the Foreign Service
Act of 1980;
* * * * * * *
(b) Termination of Application of Subsection
(a)(4) in Certain Cases.--
(1) In general.--Subsection (a)(4) shall not
apply in the case of any individual who is not
described in paragraph (2).
(2) Individuals to whom subsection (a)(4)
continues to apply.--An individual is described in
this paragraph if--
* * * * * * *
(D) on application therefor, he would be
entitled to receive disability compensation
from the Veterans’ Administration.
Benefits paid under CSRS do not provide compensation for
military injuries. Haar v. Commissioner, 78 T.C. 864, 866
(1982), affd. per curiam 709 F.2d 1206 (8th Cir. 1983). Title 5
U.S.C. sec. 8337(a) (2000) provides:
Any employee shall be considered to be disabled only if
the employee is found by the Office of Personnel
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Management to be unable, because of disease or injury,
to render useful and efficient service in the
employee’s position and is not qualified for
reassignment, under procedures prescribed by the
Office, to a vacant position which is in the agency at
the same grade or level and in which the employee would
be able to render useful and efficient service.
Under this provision, the nature or cause of the disability is
irrelevant, and all that is taken into account is the employee’s
ability to perform his or her job or a vacant position in his or
her agency at the same grade or level. See also Haar v.
Commissioner, supra at 866-867 (similarly discussing former 5
U.S.C. sec. 8331(6) (1976), repealed by the Omnibus
Reconciliation Act of 1980, Pub. L. 96-499, sec. 403(b), 94 Stat.
2606, which defined disability as meaning totally disabled or
total disability for useful and efficient service in the grade or
class of position last occupied by the employee because of
disease or injury). Accordingly, in determining eligibility for
disability retirement and the amount of disability annuity
payments under CSRS, no consideration is given to whether the
disease or injury arose from military service. See id. at 867.
Accordingly, we conclude that section 104(a)(4) did not
entitle petitioner to exclude the disability payments he received
in 1999 because disability payments made under CSRS are not paid
for personal injuries or sickness incurred in military service.
Id.; see also Rutt-Hahn v. Commissioner, T.C. Memo. 1996-536
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(section 104(a)(4) does not apply to disability payments made
under CSRS for civilian service).
For the sake of completeness, we shall address some
additional points raised by petitioner. First, petitioner’s
injury was not incurred in military service. Petitioner
testified that he suffered from his symptoms prior to entering
the Army.
Second, petitioners argue that petitioner satisfied the
requirements of section 104(b)(2)(D). In order for section
104(a)(4) to continue to apply pursuant to section 104(b),
section 104(a)(4) must apply in the first place--i.e., the
amounts must be received for personal injuries or sickness
resulting from active service in the Armed Forces. We have found
that section 104(a)(4) does not apply to the $13,380 petitioner
received from OPM; therefore, the provisions of section 104(b)
are not applicable to this case. See Kiourtsis v. Commissioner,
T.C. Memo. 1996-534.
Third, even if the provisions of section 104(b) were
applicable to this case, petitioner is not an individual
described in section 104(b)(2). Petitioners contend that
petitioner was entitled to receive disability compensation from
the VA and this would qualify him under section 104(b)(2)(D).
Contrary to their assertions, the VA denied petitioner’s
application for disability compensation (i.e., he is not entitled
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to receive disability compensation from the VA). This is
established by the evidence petitioners presented3 and several
court decisions which we take judicial notice of pursuant to Rule
201 of the Federal Rules of Evidence. Jeanmarie v. Principi, No.
02-1662, 2002 U.S. App. Vet. Claims LEXIS 1072, 2003 WL 115322
(Vet. App., Dec. 10, 2002); Jeanmarie v. Gober, No. 97-1886, 2001
WL 47295 (Vet. App., Nov. 30, 2000); Jeanmarie v. West, No. 97-
1886, 1998 WL 223457 (Vet. App., Apr. 20, 1998), remanded without
published opinion 194 F.3d 1332 (Fed. Cir. 1999).
Last, petitioners contend that respondent allowed
petitioners to exclude petitioner’s CSRS annuity from income in
prior tax years. Each taxable year stands alone, and the
Commissioner may challenge in a succeeding year what was condoned
or agreed to in a prior year. Rose v. Commissioner, 55 T.C. 28,
31-32 (1970); see Kiourtsis v. Commissioner, supra (applying this
principle in the context of a section 104(a)(4) case).
To reflect the foregoing,
Decision will be entered
under Rule 155.
3
At the close of the trial, the Court offered to keep the
record open so petitioners could supply additional records
regarding petitioner’s VA claims. Petitioners objected, so we
closed the record.