T.C. Memo. 2006-50
UNITED STATES TAX COURT
ANTHONY LaCARTER DORSEY AND ANNETTE LaVERNE DORSEY, Petitioners
v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20632-04. Filed March 22, 2006.
Anthony LaCarter Dorsey and Annette LaVerne Dorsey, pro se.
Natasha V. Chevalier, for respondent.
MEMORANDUM OPINION
WELLS, Judge: Respondent determined a deficiency of $2,092
in petitioners’ Federal income tax for 2002. The issue to be
decided is whether petitioners may exclude from gross income a
portion of payments that Anthony LaCarter Dorsey (petitioner)
received in his capacity as a Junior Reserve Officers’ Training
Corps (JROTC) instructor. Unless otherwise noted, all section
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references are to the Internal Revenue Code, as amended. Some of
the facts have been stipulated and are so found.
Background
Petitioners are husband and wife. At the time of the filing
of the petition, petitioners resided in Arlington, Texas.
Petitioner retired from the United States Army in 1995, and
petitioner was not on active duty for any part of 2002. During
2002, the Dallas Independent School District (the school
district) employed petitioner as a JROTC instructor, and
petitioner received wages of $44,347 from the school district.
Discussion
Although petitioners concede that petitioner was not an
“active duty member” of the Armed Forces during 2002, petitioners
contend that JROTC instructors are “active members” of the Armed
Forces pursuant to Army Regulations 145-2, Junior Reserve
Officers’ Training Corps Program.1 Relying on IRS Publication 3,
Armed Forces’ Tax Guide (Publication 3), petitioners contend that
petitioner’s status as an active member of the Armed Forces
allows petitioners to exclude from gross income allowances for
subsistence, housing, and uniforms in the aggregate amount of
$13,968.21. In support of the exclusion, petitioners testified
at trial that the school district received payments from the
1
Ch. 4-3 of Army Regulations 145-2 provides as follows:
“Equitable procedures. Military retirees employed as Junior ROTC
instructors are members of the Armed Forces not on active duty.”
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Federal Government with respect to the school district’s
employment of petitioner as a JROTC instructor and that
petitioner received from the school district monthly statements
itemizing the aforementioned allowances. Additionally,
petitioners testified that during respondent’s audit with respect
to a prior tax year an IRS employee instructed them to exclude
from gross income allowances for subsistence, housing, and
uniforms.
Respondent contends that only active duty members of the
Armed Forces are entitled to exclude the allowances in issue.
Because petitioner was not an active duty member of the Armed
Forces during 2002, respondent contends that petitioners are not
entitled to exclude from gross income allowances for subsistence,
housing, and uniforms. Rather, respondent contends that payments
petitioner received with respect to his employment as a JROTC
instructor constitute compensation from the school district for
services rendered that must be included in petitioners’ gross
income for 2002.
We first address petitioners’ reliance on Publication 3.
The authoritative sources of Federal tax law are statutes,
regulations, and judicial decisions. Miller v. Commissioner, 114
T.C. 184, 195 (2000), affd. sub nom. Lovejoy v. Commissioner, 293
F.3d 1208 (10th Cir. 2002). Administrative guidance set forth in
an informal IRS publication is not an authoritative source of
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Federal tax law and does not bind the Government. Id. Taxpayers
rely on such publications at their own peril. Id. Consequently,
we will not address petitioners’ contentions regarding
Publication 3 with respect to the availability of the allowances
in issue to JROTC instructors.2
Turning to the applicable statutes, regulations, and
judicial decisions, section 61(a) provides that gross income
includes all income from whatever source derived except as
otherwise provided. Section 1.61-2(b), Income Tax Regs.,
provides that subsistence allowances, uniform allowances, and
other amounts received as commutation of quarters are excluded
from gross income. Furthermore, section 134(a) provides that
gross income shall not include any qualified military benefit.3
2
Publication 3 states that the “publication covers the
special tax situations of active members of the U.S. Armed
Forces” and separately lists basic allowances for housing, basic
allowances for subsistence, and uniform allowances as “excluded
items”. As discussed below, however, retired officers do not
receive nontaxable allowances from the Federal Government with
respect to their employment as JROTC instructors. Consequently,
we note that Publication 3 does not support petitioners’
contentions.
3
SEC. 134. CERTAIN MILITARY BENEFITS.
(a) General Rule.--Gross income shall not include any
qualified military benefit.
(b) Qualified Military Benefit.--For purposes of this
section--
(1) In general.--The term “qualified military
benefit” means any allowance or in-kind benefit (other
(continued...)
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We must decide whether payments that petitioner received in his
capacity as a JROTC instructor represent taxable compensation for
services rendered to the school district or are instead
nontaxable allowances.
Retired commissioned or noncommissioned officers may serve
as instructors in JROTC units pursuant to the following
provisions of 10 U.S.C. sec. 2031(d) (2000):
(d) Instead of, or in addition to, detailing
officers and noncommissioned officers on active duty *
* * the Secretary of the military department concerned
may authorize qualified institutions to employ, as
administrators and instructors in the program, retired
officers and noncommissioned officers * * * whose
qualifications are approved by the Secretary and the
institution concerned and who request such employment,
subject to the following:
(1) A retired member so employed is entitled to
receive the member’s retired or retainer pay without
reduction by reason of any additional amount paid to
the member by the institution concerned. In the case
of payment of any such additional amount by the
institution concerned, the Secretary of the military
department concerned shall pay to that institution the
amount equal to one-half of the amount paid to the
3
(...continued)
than personal use of a vehicle) which--
(A) is received by any member or former
member of the uniformed services of the United
States or any dependent of such member by reason
of such member’s status or service as a member of
such uniformed services, and
(B) was excludable from gross income on
September 9, 1986, under any provision of law,
regulation, or administrative practice which was
in effect on such date (other than a provision
of this title).
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retired member by the institution for any period, up to
a maximum of one-half of the difference between the
member’s retired or retainer pay for that period and
the active duty pay and allowances which the member
would have received for that period if on active duty.
Notwithstanding the limitation in the preceding
sentence, the Secretary concerned may pay to the
institution more than one-half of the additional amount
paid to the retired member by the institution if (as
determined by the Secretary) the institution is in an
educationally and economically deprived area and the
Secretary determines that such action is in the
national interest. Payments by the Secretary concerned
under this paragraph shall be made from funds
appropriated for that purpose.
(2) Notwithstanding any other provision of law,
such a retired member is not, while so employed,
considered to be on active duty or inactive duty
training for any purpose.
It has been held that no part of the amount received from a
school district by a retired military officer for services as a
JROTC instructor is excludable from gross income as a housing or
subsistence allowance. Lyle v. Commissioner, 76 T.C. 668, 674-
678 (1981), affd. without published opinion 673 F.2d 1326 (5th
Cir. 1982); Bynam v. Commissioner, T.C. Memo. 2001-142; Tucker v.
Commissioner, T.C. Memo. 1999-373. JROTC instructors are
employed by the educational institutions in which they teach and
not by the Federal Government. 10 U.S.C. sec. 2031(d); Lyle v.
Commissioner, supra at 674; Bynam v. Commissioner, supra; Tucker
v. Commissioner, supra. Accordingly, a JROTC instructor receives
income from the school as compensation for services rendered and
not by reason of that instructor’s status as a member or former
member of the Armed Forces. Lyle v. Commissioner, supra at 674.
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Consequently, we conclude that payments petitioner received with
respect to his employment as a JROTC instructor constitute
compensation for services rendered to the school district.
Petitioner’s status as a member or former member of the Armed
Forces therefore has no effect on the inclusion of such payments
in gross income.
As stated in Lyle v. Commissioner, supra at 674: “we think
that Congress never intended to pay any nontaxable ‘allowances’
to retired officers serving as Junior ROTC instructors.” The
provisions of 10 U.S.C. sec. 2031(d)(1) do not authorize the
Federal Government to pay nontaxable allowances to retired
military personnel serving as JROTC instructors but merely
provide a formula for computing the minimum “additional amount”
of compensation that such retired instructors may receive from
the employing school and the maximum portion of such an
additional amount that will be reimbursed by the Federal
Government. Lyle v. Commissioner, supra at 675. Consequently,
monthly statements petitioner received from the school district
itemizing allowances represented the amount of reimbursement
available to the school district from the Federal Government
pursuant to 10 U.S.C. sec. 2031(d)(1) rather than actual
allowances excludable from petitioners’ gross income.
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For the foregoing reasons, we conclude that petitioner
received compensation from the school district and received no
qualified military benefit for purposes of section 134(b) with
respect to his services as a JROTC instructor. No portion of
petitioner’s income from the school district is excludable from
petitioners’ 2002 gross income.4
To reflect the foregoing,
Decision will be entered for
respondent.
4
We note that respondent, if he permitted these allowances
to be excluded from petitioners’ income for any prior tax year,
would not be bound thereby to do the same for the year in suit.
See Coors v. Commissioner, 60 T.C. 368, 406 (1973), affd. 519
F.2d 1280 (10th Cir. 1975); Union Equity Coop. Exch. v.
Commissioner, 58 T.C. 397, 408 (1972), affd. 481 F.2d 812 (10th
Cir. 1973); Leubert v. Commissioner, T.C. Memo. 1983-457.