T.C. Summary Opinion 2011-9
UNITED STATES TAX COURT
ROBERT AND MILLICENT M. LOWERY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 27978-08S. Filed February 3, 2011.
Robert and Millicent M. Lowery, pro se.
Randall B. Childs, for respondent.
MORRISON, 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. Pursuant to section 7463(b),
the decision to be entered is not reviewable by any other court,
and this opinion shall not be treated as precedent for any other
case. Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
- 2 -
The respondent determined a deficiency of $2,047 in the
petitioners’ federal income tax for the taxable year 2006. The
issue for decision is whether a portion of the Social Security
benefits the petitioners received in 2006 is includable in their
gross income.1
Background
Some of the facts have been stipulated, and they are so
found. The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time they filed
their petition, the petitioners resided in Georgia.
During the year in issue, the petitioners received Social
Security benefits totaling $15,945. The petitioners filed a Form
1040A, U.S. Individual Income Tax Return, for the 2006 taxable
year. They elected to file jointly and reported adjusted gross
income of $59,007.50. This amount did not, however, include any
of the $15,945 of Social Security benefits that the petitioners
received during the 2006 taxable year.
The respondent contends that a portion of the Social
Security benefits the petitioners received in 2006 is includable
as gross income under section 86. The petitioners contend
otherwise, claiming that taxing Social Security benefits amounts
to double taxation.
1
The petitioners conceded at trial that $95 received from
Manhattan Life Insurance Co. should be included in their income.
- 3 -
Discussion
The amount of Social Security benefits to be included in
gross income is determined by a statutory formula found in
section 86. See sec. 86(a)-(d). Section 86 requires inclusion
of a portion of the payments if the sum of the taxpayer’s
adjusted gross income (with certain modifications not relevant
here) and one-half of the Social Security benefits received
exceeds a specified “base amount”. Jelle v. Commissioner, 116
T.C. 63, 71 (2001). This base amount is $32,000 for taxpayers
like the petitioners who are married and filed a joint return.
See sec. 86(c)(1)(B). Since the petitioners reported adjusted
gross income of $59,007.50 and received Social Security benefits
totaling $15,945 during the 2006 taxable year, the base amount
threshold has been exceeded. We therefore sustain the
respondent’s determination that a portion of the $15,945 the
petitioners received in 2006 as Social Security benefits must be
included in the petitioners’ gross income for that taxable year.
The petitioners argue that the amounts that they contributed
to the Social Security system have already been taxed and that
they should not be taxed again as they receive benefits from
Social Security. This argument is unavailing for reasons we
explained in Roberts v. Commissioner, T.C. Memo. 1998-172, affd.
without published opinion 182 F.3d 927 (9th Cir. 1999). One can
imagine a system of taxing Social Security benefits whereby the
- 4 -
benefits are free of tax until they exceed the total FICA taxes
paid by the recipient. Such a system was not enacted by
Congress. Instead Congress enacted section 86, which, in
recognition that Social Security benefits are partly financed by
employees, does not require every dollar of Social Security
benefits to be included in the income of the recipient. It
requires only a fraction of the benefits to be included. This
fraction is 85 percent for the petitioners, as the IRS correctly
calculates.
To reflect the foregoing,
Decision will be entered
for respondent.