T.C. Summary Opinion 2005-43
UNITED STATES TAX COURT
SHAWN JEFFREY HINTZ, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 21553-03S. Filed April 14, 2005.
Shawn Jeffrey Hintz, pro se.
Catherine S. Tyson, for respondent.
GOLDBERG, 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
effect for the year in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
- 2 -
Respondent determined a deficiency in petitioner’s Federal
income tax of $1,465 for the taxable year 2001.
After concessions, the issue for decision is whether
petitioner is entitled to exclude from gross income $3,468
received as disability pension income from the Defense Finance
and Accounting Service because his pension income received is due
to a combat-related injury under section 104(b)(2)(C).
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. Petitioner resided in San
Antonio, Texas, on the date the petition was filed in this case.
From August 27, 1980, to March 26, 1984, petitioner served
in the United States Army. While serving in the United States
Army, petitioner was assigned a primary specialty of 11B10,
infantryman.
Petitioner enlisted with the United States Army at the age
of 18. After enlisting, petitioner went to basic training for 4
months at Fort Benning, Georgia. After basic training,
petitioner was transferred to Fort McNair in Washington, D.C.
While stationed at Fort McNair, petitioner was delegated to
presidential guard assignment. This assignment included such
- 3 -
duties as presidential guard, battle reenactments,1 and
operation/field duty at different posts throughout the United
States. Petitioner was never in actual combat.
In February 1984, petitioner underwent a medical evaluation
at Walter Reed Army Medical Center. As a result of this
evaluation, petitioner was diagnosed as having “bipolar disorder,
manic, with mood-congruent psychotic features”. This diagnosis
resulted in petitioner’s being “relieved from assignment and duty
because of physical disability incurred while entitled to basic
pay and under conditions which permit * * * [his being placed] on
the Temporary Disability Retired List” as of March 12, 1984.
Petitioner’s effective date of retirement was March 26, 1984. On
November 26, 1985, petitioner was removed from the Temporary
Disability Retired List (TDRL) and put on permanent retirement as
a result of permanent disability.
After his discharge from the United States Army, petitioner
moved back to his parents’ home in Eureka, California. For a
brief period, after his discharge, petitioner attended the
College of the Redwoods, taking a variety of courses, with a
special interest in sociology and psychology. At the time of
trial, petitioner was a first-year apprentice with a pipefitters
union. Sometime in 1984, petitioner was hospitalized in the
General Hospital at Eureka during a psychiatric visit, where it
1
We understand these reenactments to be combat simulations.
- 4 -
was discovered he had scarlet fever. At this hospital, it was
determined that his psychiatric symptomology was due to delirium.
During 2001, petitioner received disability pension income
of $3,468 from the Defense Finance and Accounting Service.
By notice of deficiency, respondent determined that
petitioner’s disability pension income of $3,468 from the Defense
Finance and Accounting Service in tax year 2001 is not excludable
from gross income under section 104(b)(2)(C).
Discussion
In general, the Commissioner’s determination set forth in a
notice of deficiency is presumed correct, and the taxpayer bears
the burden of showing that the determination is in error. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). In certain
circumstances, however, if the taxpayer introduces credible
evidence with respect to any factual issue relevant to
ascertaining the proper tax liability, section 7491 places the
burden of proof on the Commissioner. Sec. 7491(a)(1). Credible
evidence is “‘the quality of evidence which, after critical
analysis, * * * [a] court would find sufficient * * * to base a
decision on the issue if no contrary evidence were submitted’”.
Higbee v. Commissioner, 116 T.C. 438, 442 (2001) (quoting H.
Conf. Rept. 105-599, at 240-241 (1998), 1998-3 C.B. 747, 994-
995). Section 7491(a)(1) applies only if an individual taxpayer
complies with substantiation requirements, maintains all required
- 5 -
records, and cooperates with reasonable requests by the
Commissioner for witnesses, information, documents, meetings, and
interviews. Sec. 7491(a)(2).
In this case, section 7491 is inapplicable because
petitioner did not introduce any credible evidence with respect
to the origination of his disability and failed to comply with
the substantiation, cooperation, and record-keeping requirements.
The burden of proof remains on petitioner to show that
respondent’s determination is in error.
Disability Pension Income
As previously stated, the issue for decision is whether
under section 104(b)(2)(C) petitioner is entitled to exclude from
gross income $3,468 of pension income because he claims it was
received on account of a combat-related injury. Respondent
argues that petitioner has not introduced credible evidence as to
the origination of his disability; thus the disability pension
income is not excluded from gross income under section
104(b)(2)(C). On the record, we agree with respondent.
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 taxable income means “all
income from whatever source derived”. The Supreme Court has long
reiterated the sweeping scope of section 61. Commissioner v.
- 6 -
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 exclusion 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);
Banaitis v. Commissioner, supra at 1079. Section 104(a) provides
in pertinent part:
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; * * *
- 7 -
Congress enacted section 104(b) to curb perceived abuses of
section 104(a)(4).2 Section 104(b)(1) provides that the
exclusion under section 104(a)(4) is restricted to the classes of
individuals described in section 104(b)(2), as follows:
(2) Individuals to whom subsection (a)(4) continues to
apply.--An individual is described in this paragraph if–-
(A) on or before September 24, 1975, he was
entitled to receive any amount described in subsection
(a)(4),
(B) on September 24, 1975, he was a member of any
organization (or reserve component thereof) referred to
in subsection (a)(4) or under a binding written
commitment to become such a member,
(C) he receives an amount described in subsection
(a)(4) by reason of a combat-related injury, or
(D) on application therefor, he would be entitled
to receive disability compensation from the Veterans’
Administration.
For purposes of section 104(b)(2)(C), the term “combat-related
injury” means personal injury or sickness that is: (1) Incurred
as a direct result of armed conflict, while engaged in extra
2
The legislative history explains the reasons for the 1976
amendments as follows:
In many cases, armed forces personnel have been classified
as disabled for military service shortly before they would
have become eligible for retirement principally to obtain
the benefits of the special tax exclusion on the disability
portion of their retirement pay. In most of these cases the
individuals, having retired from the military, earn income
from other employment while receiving tax-free “disability”
payments from the military. * * * [H. Rept. 94-658, at 152
(1975), 1976-3 C.B. (Vol. 2) 695, 844.]
- 8 -
hazardous service, or under conditions simulating war; or (2)
caused by an instrumentality of war. Sec. 104(b)(3).3
As previously stated, during 2001, petitioner received
disability pension income of $3,468 from the Defense Finance and
Accounting Service. Petitioner claims that he is entitled to
exclude his disability pension income from gross income because
he served in a combat-related specialty.4
To support his contention, petitioner provided copies of
Form DD214, Certificate of Release or Discharge From Active Duty,
Form DA 199, Physical Evaluation Board Proceedings, and a TDRL
Evaluation.
Form DD214 summarizes petitioner’s military service. It
shows that petitioner served in a primary specialty of 11B10,
infantryman, and that he was separated from duty on account of a
disability. The decorations section of Form DD214 lists only
3
Sec. 104(b)(3) also provides that “In the case of an
individual who is not described in subparagraph (A) or (B) of
paragraph (2), except as provided in paragraph (4), the only
amounts taken into account under subsection (a)(4) shall be the
amounts which he receives by reason of a combat-related injury.”
4
In his petition, petitioner refers to combat-related
special compensation (CRSC). CRSC provides additional
compensation for certain retirees with qualifying disabilities
rated at 60 percent or higher or for retirees with disabilities
associated with the award of a Purple Heart decoration. CRSC was
not authorized until the passage of the Bob Stump National
Defense Authorization Act for Fiscal Year 2003, Pub. L. 107-314,
sec. 636, 116 Stat. 2574. Since the tax year at issue in the
present case, 2001, is prior to the authorization of such
compensation, petitioner’s reference to CRSC is erroneous.
- 9 -
normal basic training ribbons such as: Good conduct medal,
expert badge W/M-16 rifle and hand grenades bars, army service
ribbon, and NCO professional development ribbon. The decorations
section of Form DD214 lacks any combat-related decoration such as
a campaign ribbon. The record of service section of Form DD214
shows that petitioner did not serve in any foreign country.
Moreover, petitioner admits he was never in actual combat.
To further support his contention that the pension income at
issue in the present case is eligible for exclusion from gross
income under section 104(b)(2)(C), petitioner provided a copy of
Form DA 199, Physical Evaluation Board Proceedings. However,
those sections of the form that relate to the origin of the
medical problem have been left blank.
Moreover, in support of his contention, petitioner provided
a copy of a TDRL Evaluation, a medical evaluation which took
place on April 24, 1985, after petitioner had retired from active
duty. The History of Original Illness section of the TDRL
Evaluation reads: “See original Medical Board Summary, dated
February, 1984.” The Medical Board Summary has not been supplied
by petitioner and is not in the record of this case.
The evidence petitioner presented and his own testimony show
only that he served in the United States Army as an infantryman
and that he was retired on account of his bipolar disorder. The
evidence in the record does not show that his illness was
- 10 -
incurred as a direct result of any combat-related activity or
under conditions simulating war. From the record, we conclude
that petitioner suffered from bipolar disorder which may have
resulted in part from the stress of routine military duty. Such
a disorder without evidence of its direct result from combat-
related activity is not a combat-related injury as defined by
section 104(b)(3). Therefore, respondent’s determination on this
issue is sustained.
Conclusion
We have considered all of the other arguments made by the
parties, and, to the extent that we have not specifically
addressed them, we conclude they are without merit.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.