T.C. Memo. 2005-133
UNITED STATES TAX COURT
GLORIA YUEN-MEE HO AND ALEXANDER CHI-SHUN TSANG, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 3242-04, 18499-04. Filed June 2, 2005.
Gloria Yuen-Mee Ho and Alexander Chi-Shun Tsang, pro sese.
T. Richard Sealy III and Kelli H. Todd, for respondent.
MEMORANDUM OPINION
COHEN, Judge: In these consolidated cases, respondent
determined deficiencies of $650 and $1,405 in petitioners’
Federal income taxes for 2001 and 2002, respectively, that were
attributable to respondent’s disallowance of petitioner Alexander
Chi-Shun Tsang’s (petitioner) Individual Retirement Account (IRA)
contribution deduction in both years. After concessions by the
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parties, the issue for decision is whether petitioners are
entitled to claim a deduction for petitioner’s IRA contributions
in 2001. 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.
Background
These cases were submitted fully stipulated under Rule 122.
The stipulated facts are incorporated as our findings by this
reference. Petitioners resided in Cibolo, Texas, at the time
that they filed their petitions.
Petitioners timely filed joint Federal income tax returns
for 2001 and 2002. During 2001 and 2002, petitioner was an
active participant in a section 403(b) employer-sponsored
retirement plan through his employment with the University of
Texas Medical Branch. Petitioner claimed IRA contribution
deductions of $2,000 and $3,000 in 2001 and 2002, respectively.
As reported on petitioners’ joint income tax returns for 2001 and
2002, petitioners’ modified adjusted gross income (AGI) was
$114,193.66 in 2001 and $124,304.43 in 2002. (We use the term
“modified AGI” to mean AGI computed without regard to any
deduction for an IRA contribution.) In 2001, petitioner’s
reported earnings were $61,256.27, his spouse’s reported earnings
were $52,000.08, and they reported interest income of $937.31.
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On November 24, 2003, the Internal Revenue Service (IRS)
mailed to petitioners a notice of deficiency disallowing
petitioner’s $2,000 deduction for his IRA contribution in 2001.
On June 28, 2004, the IRS mailed to petitioners a notice of
deficiency disallowing petitioner’s $3,000 deduction for his IRA
contribution in 2002. Petitioners have conceded the issue for
2002.
Discussion
With certain limitations, a taxpayer is entitled to deduct
the amounts that the taxpayer contributes to an IRA. See sec.
219(a). The deduction, however, may not exceed the lesser of
(1) $2,000 or (2) an amount equal to the compensation includable
in the taxpayer's gross income. See sec. 219(b)(1).
If, for any part of a taxable year, a taxpayer or the
taxpayer’s spouse is an “active participant” in a qualified plan
under section 403(b), the amount of the deduction allowed under
section 219(a) for that year may be further limited. See sec.
219(g)(1), (5)(A)(iv). In the case of a married taxpayer who
files a joint income tax return, the $2,000 limitation of section
219(b)(1) is reduced using a ratio determined by dividing the
excess of the taxpayer's modified AGI over the applicable dollar
amount, which is $53,000 for 2001, by $10,000. See sec.
219(g)(2)(A), (3)(B)(i). Because this case deals with a taxpayer
who was an active participant and who was married and filed a
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joint return for 2001 on which the modified AGI exceeded $63,000,
the application of section 219(g)(2) and (3) results in a total
disallowance of the IRA contribution deduction. See Felber v.
Commissioner, T.C. Memo. 1992-418, affd. without published
opinion 998 F.2d 1018 (8th Cir. 1993); see also Wade v.
Commissioner, T.C. Memo. 2001-114.
Petitioners contend that because section 219(g)(2)(A)(i)
refers to the AGI of the taxpayer in the singular form, the
“literal reading” of section 219 requires the IRS to consider
only the individual spouse’s AGI in determining the reduction or
elimination of an IRA contribution deduction. Petitioners argue,
therefore, that, because petitioner had less than $63,000 of
income in 2001, the $2,000 IRA contribution deduction should be
allowed. Petitioners’ argument overlooks the structure of
section 219(g)(3)(B), which prescribes two tables for the
applicable dollar amounts to be used in determining the reduction
or elimination of a contribution deduction. Because taxpayers
who file jointly are entitled to a higher ceiling for their AGI,
see sec. 219(g)(3)(B)(i), the necessary implication is that the
AGI to be used in the calculation is that of both spouses. In
applying section 219(g)(2) and (3), the Court has looked to the
combined AGI of married taxpayers filing jointly and not to an
individual spouse’s AGI to determine the reduction or elimination
of the IRA contribution deduction. See, e.g, Felber v.
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Commissioner, supra; see also Wade v. Commissioner, supra; Freese
v. Commissioner, T.C. Memo. 1996-224.
Petitioners reported a modified AGI of $114,193.66 on their
2001 joint income tax return. Therefore, petitioners are not
entitled to claim a deduction for petitioner’s IRA contribution
in 2001 because petitioner was an active participant in an
employer-sponsored retirement plan during that year and because
petitioners’ modified AGI exceeded the $63,000 threshold set for
that year.
Petitioners request in their brief that the Court “dismiss
the interest penalties assessed by the IRS on both tax years, as
it significantly delayed notification of its findings”. As a
general rule, this Court does not have jurisdiction over matters
involving interest. Perkins v. Commissioner, 92 T.C. 749, 752
(1989). None of the exceptions to this rule apply in these
cases. See, e.g., sec. 7481(c); see also sec. 6404(h).
We have considered all of the remaining arguments that have
been made by petitioners for a result contrary to that expressed
herein, and, to the extent not discussed above, they are either
without merit or irrelevant to our decision.
To reflect the foregoing,
Decisions will be entered
for respondent.