§86 — Social security and tier 1 railroad retirement benefits
155 cases·83 followed·11 distinguished·5 questioned·56 cited—54% support
Statute Text — 26 U.S.C. §86
Except as provided in paragraph (2), gross income for the taxable year of any taxpayer described in subsection (b) (notwithstanding section 207 of the Social Security Act) includes social security benefits in an amount equal to the lesser of—
one-half of the social security benefits received during the taxable year, or
one-half of the excess described in subsection (b)(1).
In the case of a taxpayer with respect to whom the amount determined under subsection (b)(1)(A) exceeds the adjusted base amount, the amount included in gross income under this section shall be equal to the lesser of—
the sum of—
85 percent of such excess, plus
the lesser of the amount determined under paragraph (1) or an amount equal to one-half of the difference between the adjusted base amount and the base amount of the taxpayer, or
85 percent of the social security benefits received during the taxable year.
A taxpayer is described in this subsection if—
the sum of—
the modified adjusted gross income of the taxpayer for the taxable year, plus
one-half of the social security benefits received during the taxable year, exceeds
the base amount.
For purposes of this subsection, the term “modified adjusted gross income” means adjusted gross income—
determined without regard to this section and sections 85(c), 135, 137, 221, 911, 931, and 933, and
increased by the amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.
For purposes of this section—
The term “base amount” means—
except as otherwise provided in this paragraph, $25,000,
$32,000 in the case of a joint return, and
zero in the case of a taxpayer who—
is married as of the close of the taxable year (within the meaning of section 7703) but does not file a joint return for such year, and
does not live apart from his spouse at all times during the taxable year.
The term “adjusted base amount” means—
except as otherwise provided in this paragraph, $34,000,
$44,000 in the case of a joint return, and
zero in the case of a taxpayer described in paragraph (1)(C).
For purposes of this section, the term “social security benefit” means any amount received by the taxpayer by reason of entitlement to—
a monthly benefit under title II of the Social Security Act, or
a tier 1 railroad retirement benefit.
For purposes of this section, the amount of social security benefits received during any taxable year shall be reduced by any repayment made by the taxpayer during the taxable year of a social security benefit previously received by the taxpayer (whether or not such benefit was received during the taxable year).
If (but for this subparagraph) any portion of the repayments referred to in subparagraph (A) would have been allowable as a deduction for the taxable year under section 165, such portion shall be allowable as a deduction only to the extent it exceeds the social security benefits received by the taxpayer during the taxable year (and not repaid during such taxable year).
For purposes of this section, if, by reason of section 224 of the Social Security Act (or by reason of section 3(a)(1) of the Railroad Retirement Act of 1974), any social security benefit is reduced by reason of the receipt of a benefit under a workmen’s compensation act, the term “social security benefit” includes that portion of such benefit received under the workmen’s compensation act which equals such reduction.
For purposes of paragraph (1), the term “tier 1 railroad retirement benefit” means—
the amount of the annuity under the Railroad Retirement Act of 1974 equal to the amount of the benefit to which the taxpayer would have been entitled under the Social Security Act if all of the service after
December 31, 1936
, of the employee (on whose employment record the annuity is being paid) had been included in the term “employment” as defined in the Social Security Act, and
a monthly annuity amount under section 3(f)(3) of the Railroad Retirement Act of 1974.
For purposes of subsection (a), in any case where section 708 of the Social Security Act causes social security benefit checks to be delivered before the end of the calendar month for which they are issued, the benefits involved shall be deemed to have been received in the succeeding calendar month.
If—
any portion of a lump-sum payment of social security benefits received during the taxable year is attributable to prior taxable years, and
the taxpayer makes an election under this subsection for the taxable year,
For purposes of this subsection, a social security benefit is attributable to a taxable year if the generally applicable payment date for such benefit occurred during such taxable year.
An election under this subsection shall be made at such time and in such manner as the Secretary shall by regulations prescribe. Such election, once made, may be revoked only with the consent of the Secretary.
then the amount included in gross income under this section for the taxable year by reason of the receipt of such portion shall not exceed the sum of the increases in gross income under this chapter for prior taxable years which would result solely from taking into account such portion in the taxable years to which it is attributable.
For purposes of—
section 22(c)(3)(A) (relating to reduction for amounts received as pension or annuity),
section 32(c)(2) (defining earned income),
section 219(f)(1) (defining compensation), and
section 911(b)(1) (defining foreign earned income),
any social security benefit shall be treated as an amount received as a pension or annuity.
155 Citing Cases
86, as discussed above. The difference is moot because the phaseout ofthe sec. 36A credit does not apply to petitioner.
In applying the formula in section 86 to case s involving a joint return, we have not distinguished between income earned by the recipient of Social Security benefits and income earned by the recipient's spouse . See, e .g ., Reimels v . Commissioner, supra at 247-248 ; Green v . Commissioner, supra; Penn v. Commissioner , T .C . Memo . 2001-267 ; Thomas v . Commissioner, T .C. Memo . 2001-120 . Petitioners' interpretation of section 86 would lead to incongruous results .
864, 866 (1982), affd. 709 F.2d 1206 (8th Cir. 1983), and its progeny, respondent contends that the section 104 (a) (4) exclusion is inapplicable because Social Security disability insurance benefits are not paid for personal injury or sickness incurred in military service within the meaning of section 104 (a) (4) .
Petitioners argue further that if the pension distributions are excluded, the Social Security payments are not taxable under section 86 because their joint income is less than $32,000. Because the Court decides this case without regard to the burden of proof, section 7491 is inapplicable.
Accordingly, we need not decide whether the general rule of sec.
On the other hand, respondent contends in the notice of deficiency that “We have no indication that the $14,676 was disability income from Social Security.” We, however, need not decide whether petitioner’s Social Security payments are properly characterized as disability benefits.17 Assuming arguendo that petitioner in fact received Social Security disability benefits, our analysis of whether such payments are includable in petitioner’s gross income remains unchanged.
Petitioners’ Contention In their petition, petitioners contend that respondent erred because: 3 We need not decide whether sec.
Petitioners’ Contention In their petition, petitioners contend that respondent erred because: 3 We need not decide whether sec.
Accordingly, we need not decide whether they satisfy section 105(c)(1).
Social Security benefits are taxed under section 86.
Section 86 provides that up to 85% of Social Security benefits are included in gross income, with the exact percentage depending on vari- ous income thresholds.
Accordingly, we hold that the Servances are not entitled to exclude Mr.
Generally, “[s]ection 86 requires the inclusion in gross income of up to 85 percent of Social Security benefits received.” Reimels v.
We expect that the parties will account for the $13,328 that they agree petitioners actually received, and the portion thereofthat is taxable under section 86, in their Rule 155 computations.
Section 86 provides that Social Security benefits may be subject 4Petitioners acknowledge that Mrs.
Section 86 provides that a taxpayer's gross income will include up to 85% ofany Social Security benefit received by a taxpayer during his or her taxable - 8 - year, so long as the taxpayer's modified adjusted gross income exceeds the threshold established under that section.
For the aforementioned reasons, we hold that the text ofthe statute is not ambiguous and that petitioner must include in his MAGI all ofthe Social Security benefits received in 2014, irrespective ofthe section 86(e) election.
Section 86 provides that Social Security benefits (including disability bene- fits) are includible in gross income to the extent set forth in that section.
Alexander's Social Security Disability Payments Section 86 requires the inclusion in gross income ofup to 85% ofSocial Security benefits, including disability benefits, received during the taxable year.
After concessions,2 the issue for decision is whether, pursuant to section 86(d)(3), petitioners had taxable Social Security income of $30,519 for 2011 as a result ofthe worker's compensation payments that petitioner John Thompson, Jr., received during that year.
Section 86 requires the inclusion in gross income ofup to 85% ofSocial Security benefits received.
Social Security Benefits Section 86 provides for the taxability ofSocial Security benefits pursuant to a statutory formula.
Section 86 requires that, ifa taxpayer's modified adjusted gross income plus one-halfofhis or her Social Security benefits exceeds a certain base amount, a portion ofthe taxpayer's Social Security benefits shall be included in gross - 8 - [*8] income.
Section 86 provides for the taxability ofSocial Security benefits pursuant to a statutory formula.
Section 86 provides that a taxpayer's gross income includes up to 85% of Social Security benefits, including disability benefits, received during the taxable year.
Social Security Benefits Section 86 provides that gross income for a taxable year ofany taxpayer includes up to 85% ofSocial Security benefits received during the taxable year.
Section 86 requires the inclusion in gross income ofup to 85% ofSocial Security benefits received.
Section 86 provides for the inclusion.ofSocial Security benefits in gross income and defines such benefits as any amount received by the taxpayer by reason ofentitlement to a monthly benefit under the Social Security Act.
Social Security Benefits * Section 86 requires the inclusion in gross income of up to 85 percent of Social Security benefits received.
We hold that they are.
- 3 - P NION Section 86 provides that g oss income for a taxable year of any taxpayer includes up to 8 percent of, Social Security benefits received during the t axable year.
Social Security benefits are not taxable to the extent ;provided in section 86, and we hold that they are taxable to that !extent .
; Section 86 requires the inclusion in gross income of up to 85 percent of Social Security benefits .
Security benefits is taxable under section 86 .
Analysis Section 86 requires the inclusion of Social Security benefits in gross income .
; (2) $1,088 of unemployment compensation from the Georgia Department of Labor ; 3 (3) $5,644 of Social Security benefits, of which a portion is taxable pursuant to section 86 ; (4) $22 of interest income from the Georgia Bank & Trust Co .,; (5) $6,809 .61 from Augusta Temporaries (Ex .
Section 86 provides for the inclusion in gross income of Social Security benefits if the taxpayer's modified adjusted gross income plus one-half the Social Security benefits exceeds a base amount .
Social Security Income Section 86 requires taxpayers to include in gross income up to 85 percent of any Social Security benefits received .
Of the $41,685 in Social Security benefits he received during 2001, respondent determined that $9,511 of these benefits, pursuant to section 86(a), was includable in income.
After concessions,1 the sole issue for decision is whether certain disability benefits received by petitioner Randy Gene Shreve (petitioner) under a workmen’s compensation act are includable in gross income pursuant to section 86(a).
Petitioner’s disability annuity payments are not essentially the equivalent of a Social Security benefit and thus are not Tier 1 benefits taxed under section 86.4 Tier 2 benefits consist of all benefits under the Railroad Retirement Act of 1974 other than Tier 1 benefits and are taxed 3 Petitioners do not contend that the annuity distribution is exempt under either sec.
The issue we decide is whether certain disability benefits received by petitioner Thomas Wayne Keene (petitioner) as workers' compensation are includable in gross income pursuant to section 86 (a) .
We hold that they are by virtue of section 86(d)(3).
We interpret petitioners’ argument to be that, pursuant to the prenuptial agreement, their income should not be combined for purposes of applying section 86.
Section 86 requires inclusion 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”.
OPINION Section 86 provides for the taxability of Social Security benefits pursuant to a statutory formula.
Accordingly, we hold for petitioners.
58 Total $74,372 For 1997, petitioners’ modified adjusted gross income was $68,010.4 Because petitioners’ modified adjusted gross income is more than the adjusted base amount of section 86(c)(2)(B), we hold that petitioner’s Social Security income is taxable, subject to section 86(a)(2).
The payments from the Social Security Administration are taxable under section 86.
Section 86 governs the taxability of Social Security benefits.
56, 73–74 (1986). D. Social Security Income In the case of Social Security benefits the amount included in gross income, if any, is determined in accordance with the formula set forth in section 86. Under that formula, a portion of the benefits is includible in gross income if the sum of the taxpayer’s modified adjusted gross income (MAGI), as defined by section 86(b)(2), plus one-half of the amount of Social Security benefits received, exceeds certain threshold amounts, the “base amount” and th
Unlike Supplemental Security Income benefits, which are based on need, SSDI benefits are generally based on work history and the amount ofthe beneficiary's prior contributions. See 42 U.S.C. secs. 402, 423(c)(1) (2012); 20 C.F.R. sec. 404.130 (2017). The SSA determined that peti- tioner was disabled and that she was entitled to SSDI benefits. Petitioner received SSDI benefits of$30,274 during 2013. Petitioners timely filed Form 1040, U.S. Individual Income Tax Return, for 2013. On that return th
Jacobs had received Social Security benefits by reason of a disability, the benefits might be taxable under section 86(a) . Prior to 1984, certain payments made in lieu of wages to an employee who was retired by reason of permanent and total disability were excludable from the employee's gross income under section 105(d) . However, the Social Security Amendments of 1983, Pub . L. 98-21, sec . 122(b), 97 Stat . 87, repealed the limited exclusion of disability payments provided by section 105(d),
see no reason to deviate from that practice in this case and would hold' that agreements under Rule 155 should be just as binding.¹ The majority doesn't dispute that the parties' computation under Rule 155 should be binding on them, but it then chooses to resolve the dispute over its meaning quite unlike other courts would. When a legitimate question is raised about the meaning of an ambiguous term in a contract, courts will usually rely on evidence of what the parties intended. "If * * * a cour
ely on evidence of what the parties intended. “If * * * a court refuses to consider evidence of particular meanings attached by the contracting parties, the court may discover a contract that neither party intended.” Murray, Murray on Contracts 1-5, sec. 86 (2001). That is just what has happened here, with the majority redefining the term “overpayment” in a way that changes the parties’ agreement. It answers the question — “Does the amount of an ‘overpayment’ include any underpayment interest ow
y compensation that he received from the Veterans’ Administration. By notice of deficiency, respondent determined that Mr. Reimels’s Social Security disability insurance benefits were includable in petitioners’ gross income to the extent provided in section 86. Discussion I. Inclusion of Social Security Benefits in Gross Income Before 1983, Social Security benefits were excluded from the recipient’s gross income. See, e.g., Rev. Rui. 70-217, 1970-1 C.B. 13. This longstanding practice ended with
Thus, petitioner bears the burden of proving that the failure is due to reasonable cause and not willful neglect.5 Rule 142(a)(1); United States v. Boyle, 469 U.S. 241, 245 (1985). 4 Petitioner does not contend that respondent applied the formula in sec. 86 incorrectly. Any adjustments to petitioner’s modified adjusted gross income will be made during computations under Rule 155. 5 Sec. 7491 does not apply to this proceeding. See note 2 above. - 12 - Illness or incapacity may constitute reasonab
why petitioner views his predicament in this way, but this Court is bound by the provisions of the Code. Petitioner does not dispute that he received SSDI benefits in 2022, and he must include those payments in gross income to the extent provided in section 86. His repayments during 2023 and 2024 do not affect his 2022 tax liability because the payments he received during 2022 are reduced only by “any repayment made by the taxpayer during the taxable year.” § 86(d)(2)(A) (emphasis added). This r
For purposes of the computation contemplated by the formula, the amount of Social Security benefits a taxpayer receives during any taxable year is “reduced by any repayment made by -4- the taxpayer during the taxable year of a social security benefit previously received by the taxpayer (whether or not such benefit was received during the
adjusted gross income. See generally sec. 62. The same deduction was carried over to modified adjusted gross income (MAGI), as defined by section 86(b)(2), and it was used in computing the amount oftaxable SSD benefits under the formula set forth in section 86. See sec. 86(b)(1)(A)(i). Petitioners' return reported receiving total SSD benefits of$87,004, ofwhich $19,826 was taxable. We have replicated petitioners' computation ofthe taxable SSD benefits, $19,826, in appendix A. Petitioners' 2010 r
Ifthe amount ofSocial Security benefits that a taxpayerreceives is reduced because ofthe receipt ofworkers' compensation benefits, then the amount ofthe workers' compensation benefits that causes the reduction is treated as though it were a Social Security benefit. Sec. 86(d)(3); Moore v. Commissioner, T.C. Memo. 2012-249, at *4-*5. The wo
-8- In 2010 petitioner received Social Security benefits amounting to $34,346, but, contraryto the mandate ofsection 86, he did not include any portion ofthese benefits in gross income.
de 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. The petitioners conceded at trial that $95 received from Manhattan Life Insurance Co. should be included in their income. - 3 - D
ct is not a statute in the nature of workmen ' s compensation, petitioners must include in gross income for 2003 $11 , 227 of the $13 ,208 in Social Security disability benefits that petitioner received in 2003, as per the calculation provided under section 86 . Section'165 Deduction Section 165(c) provides a deduction from income for taxpayers who incur an uncompensated loss relating to a trade or business, to a transaction entered into for profit, or to a casualty resulting in an uncompensated
g that petitioner “realized taxable income in 2001 in the amount of $17,578” from Social Security benefits, respondent has apparently overlooked the impact of his concessions for 2001 upon the computation of includable Social Security benefits under section 86. Pursuant to section 86(a)(1)(B), (b), and (c)(1)(A), petitioner is taxable on no more than the excess of the sum of his modified adjusted gross income (not including his Social Security benefits) plus one-half of his 2001 Social Security
g that petitioner “realized taxable income in 2001 in the amount of $17,578” from Social Security benefits, respondent has apparently overlooked the impact of his concessions for 2001 upon the computation of includable Social Security benefits under section 86. Pursuant to section 86(a)(1)(B), (b), and (c)(1)(A), petitioner is taxable on no more than the excess of the sum of his modified adjusted gross income (not including his Social Security benefits) plus one-half of his 2001 Social Security
g that petitioner “realized taxable income in 2001 in the amount of $17,578” from Social Security benefits, respondent has apparently overlooked the impact of his concessions for 2001 upon the computation of includable Social Security benefits under section 86. Pursuant to section 86(a)(1)(B), (b), and (c)(1)(A), petitioner is taxable on no more than the excess of the sum of his modified adjusted gross income (not including his Social Security benefits) plus one-half of his 2001 Social Security
Petitioners’ first argument is contrary to section 86 and must be rejected.
- 7 - Accordingly, petitioner’s base amount and adjusted base amount for purposes of the section 86 calculation are zero.
Under section 86, modified adjusted gross income in general equals adjusted gross income with adjustments not relevant here. Sec. 86(b)(2). Petitioner had modified adjusted gross income in 1997 in excess of $25,000. Therefore, a portion of his Social Security benefits is taxable. Accordingly, we sustain respondent’s determination that petitioner’s gross
If a taxpayer’s Social Security benefits are reduced by amounts received under a worker’s compensation act, then, for Federal income tax purposes, the worker’s compensation benefits are treated as Social Security benefits. See sec. 86(d)(3)1; Mikalonis v. Commissioner, T.C. 1 Sec. 86(d)(3) provides: SEC. 86(d)(3). Workmen’s Compensation Be
c. 61(a). Generally, gross income does not include “amounts received under workmen’s compensation acts as compensation for personal injuries or sickness.” Sec. 104(a)(1). Social Security benefits, however, are included in gross income as provided by section 86. If the amount of Social Security benefits a taxpayer receives is reduced because of the receipt of workers’ compensation benefits, the amount of the workers’ compensation benefits which caused the reduction (“the offset amount”) is includ
Section 86 specifically provides the taxpayer with a formula to determine what percentage of her Social Security benefits are includable in gross income. Because petitioner had modified adjusted-gross income plus one-half of the Social Security benefits received in excess of $34,000, section 86(a)(2) controls the determination of the amount of her
uring the years at issue as determined by respondent. 2. Social Security Benefits to Sam Zhadanov Respondent alleges that Mr. Zhadanov received $6,811 in Social Security benefits for 1993, which he did not include in his gross income as required by section 86. Section 86(a)(1) provides that, except as provided in section 86(a)(2), a taxpayer’s gross income includes the lesser of one half of any Social Security benefits received by the taxpayer during the taxable year or one-half of the amount de
concessions by the parties,1 the issues are as follows: (1) Whether petitioner’s military retirement pay is includable in gross income. We hold that it is. (2) Whether petitioner’s Social Security benefits are includable in gross income pursuant to section 86. We hold that they are. (3) Whether petitioner is liable for an addition to tax under section 6651(a)(1) for failure to file. We hold that he is. (4) Whether petitioner is liable for an addition to tax under section 6654(a) for failure to
OPINION Section 86 provides for the taxability of Social Security benefits pursuant to a statutory formula. If a taxpayer’s “modified adjusted gross income” plus one-half of the Social Security benefits received during the taxable year exceeds the “base amount”, then a portion of the taxpayer’s Social Security benefits is includable in gross income. Sec. 8
oners had unreported income of $17 in interest and $52 in dividends. Respondent concedes the interest adjustment and petitioners do not dispute the dividends adjustment. - 3 - The inclusion of Social Security benefits in gross income is governed by section 86. Social Security disability benefits are treated in the same manner as other Social Security benefits. Sec. 86(d)(1); Thomas v. Commissioner, T.C. Memo. 2001-120. Taxpayers who file a joint return and whose modified adjusted gross income pl
benefits. Respondent issued petitioners a statutory notice of deficiency with the determination that they had unreported income of $9,619 from these Social Security benefits.2 The inclusion of Social Security benefits in gross income is governed by section 86. Social Security disability benefits are treated in the same manner as other Social Security benefits. Sec. 86(d)(1); Thomas v. Commissioner, T.C. Memo. 2001-120. Taxpayers who file a joint return and whose modified adjusted gross income p
Ps are the owners of agricultural property which, prior to the transactions at issue, was subject to outstanding mortgages held by the Farmers Home Administration (FmHA). After Ps became unable to meet payment obligations under these mortgages, Ps and FmHA negotiated an alternative arrangement. Pursuant thereto, (1) Ps in 1996 paid to FmHA the $92,057 net recovery value of their property, (2) FmHA in that year wrote off the remaining loan balance of $177,772, and (3) Ps entered into a net recove
For purposes of the computation contemplated by the formula, the amount of Social Security benefits received by a taxpayer during any taxable year is “reduced by any repayment made by the taxpayer during the taxable year of a social security benefit previously received by the taxpayer (whether or not such benefit was received during the ta
nefits, is $23,586.3 Petitioner did not include any portion of the benefits in gross income. Respondent determined that 85 percent of the benefits, or $22,409, is includable. The inclusion of Social Security benefits in gross income is governed by section 86. Social Security disability benefits are treated in the same manner as other Social Security benefits. Sec. 86(d)(1); Thomas v. Commissioner, T.C. Memo. 2001-120. Under the general rule, taxpayers whose modified adjusted gross income plus ha
.S. 111 (1933).6 Issue 2. Social Security Payments Respondent determined that during 1996 petitioners received $8,496 in Social Security benefit payments and failed to include 85 percent of such payments ($7,222) in their gross income as required by section 86. Section 86 requires the inclusion of a portion of Social Security benefits in gross income when the sum of the benefit recipient’s “modified” adjusted gross income plus one-half of his or her Social Security benefits exceeds certain thres
$3,420. Of this total, respondent contends that 85 percent, or $2,907, must be reported as gross income. Petitioners have offered no argument related to their Social Security benefits. Income tax treatment of Social Security benefits is governed by section 86. Section 86 applies to require inclusion of payments if the taxpayer’s adjusted gross income, with certain modifications not relevant here, plus one-half of the Social Security benefits received, exceeds a specified base amount. See sec. 86
c. 61(a). Generally, gross income does not include “amounts received under workmen’s compensation acts as compensation for personal injuries or sickness.” Sec. 104(a)(1). Social Security benefits, however, are included in gross income as provided by section 86. Married taxpayers filing a joint return whose modified adjusted gross income plus one-half of their Social Security 3 The increase in petitioners’ adjusted gross income in 1996 resulted in a computational adjustment to petitioners’ itemiz
tute reasonable cause for not timely filing his return. Accordingly, we hold that petitioner is liable for the section 6651(a)(1) addition to tax. 3 We note that petitioner's actual gross income for 1992 is greater than his reported gross income as a result of the computational adjustment to the taxable amount of his Social Security benefits under sec. 86. - 9 - To reflect the foregoing, Decision will be entered for respondent.
OPINION Section 86 governs the taxability of Social Security benefits. Applying that section, respondent determined that the taxable portion of the benefits was $7,643. Petitioners do not dispute the accuracy of respondent's calculation. Rather, petitioners argue that the taxation of Social Security benefits is an ex post facto law in violation of Article
Social Security Benefits Section 86 requires that, if a taxpayer's modified adjusted gross income plus one-half of his or her Social Security benefits exceeds a certain base amount, a portion of the taxpayer's Social Security benefits shall be included in taxable income.
14. In the statutory notice of deficiency, respondent determined that $9,404 of petitioner's Social Security benefits must be included in his gross income. Petitioner does not contest this adjustment made by respondent pursuant to the provisions of section 86. Rather, he argues that section 86(c)(1)(C) and - 3 - (2)(C), which establishes, for purposes of calculating the taxable amount of his Social Security benefits, a "base amount" and an "adjusted base amount" of zero for taxpayers who were m
Petitioner argues that the calculation pursuant to section 86 does not result in the inclusion of any Social Security benefits in income for 1993.
Section 86 governs the taxability of Social Security benefits. That section, which is complex and cannot be parsed easily, provides in relevant part: (a) In General.-- (1) In general.--Except as provided in paragraph (2), gross income for the taxable year of any taxpayer described in subsection (b) (notwithstanding section 207 of the Social Securit
Section 86 was added by the Social Security Amendments of 1983, Pub. L. 98-21, sec. 121, 97 Stat. 80. The House report states in relevant part: Your Committee's bill provides that social security benefits potentially subject to tax will include any workmen's compensation whose receipt caused a reduction in social security disability benefits. For e
Respondent contends that Social Security disability benefits are taxed pursuant to section 86 and that one-half of the amount received is taxable to petitioner during the year in issue.
Accordingly, we sustain respondent's determination with respect to this issue. Issue 4. Unreported Agricultural Subsidy Payments Respondent determined that during the years 1987 and 1988, petitioner and his spouse, or their agent, FNB, received ASCS payments in the amounts of $11,198.96 and $11,298, respectively. Petitioner and his spouse
evant times, and Rule references are to the Tax Court Rules of Practice and Procedure. Served 07/01/24 2 After a concession,2 the issue for decision is whether petitioners must include Social Security disability (SSD) benefits in gross income under section 86. Background Some of the facts have been stipulated and are so found. When the Petition was filed, petitioners resided in California. Kimberly A. Kelly (petitioner) worked as a practicing physician in California for Southern California Perma
Social Security benefits are defined as any amount received by the taxpayer by reason of entitlement to a monthly benefit under the Social Security Act. § 86(d)(1)(A). Petitioner contends that because of his disability, the payments he received from the SSA are a “survivor benefit” and therefore not taxable. At trial petitioner testified that
§ 36B(d)(2)(A); see also Treas.
ncome Tax Regs. As pertinent here, an individual’s MAGI is his or her AGI (within the meaning of section 62), increased by the amount of any Social Security benefits (as defined in section 86(d)) which were not included in gross - 10 - income under section 86.6 Sec. 36B(d)(2)(B); sec. 1.36B-1(e)(2), Income Tax Regs. The FPL means the most recently published poverty guidelines.7 According to those guidelines, the applicable FPL for a family of one in Oklahoma during 2016 was $11,880. See supra no
1 railroad retirement benefit.” Whether and to what extent Social Security benefits are included in a taxpayer’s gross income (i.e., the taxable amount of Social Security benefits received) is calculated pursuant to a statutory formula set forth in section 86. Sec. 86(a)-(d); see Johnson v. Commissioner, 152 T.C. at 126. If the taxpayer receives a lump-sum Social Security benefit attributable to a prior year, the taxpayer may make an election under section 86(e) to limit the amount of the benef
86.770(2) (2011). The statute bars deficiency actions after ajudicial foreclosure ofa residential trust deed and after an administrative foreclosure on any type ofproperty. Id. Respondent contends that the JPMorgan Chase loan "was a recourse liability under Oregon law because the property was not subject to a residential trust deed". Ifpetitio
36B(d)(2)(A); see also sec.
492 (1986), and Blitzer v. Commissioner, 231 Ct. Cl. 236 (1982), in support ofthe proposition that revenue is not required for a business to leave the startup phase and enter the active phase. We agree. During the years at issue, however, petitioner had not collected sap, installed any ofthe infrastructure needed to convert sap into syrup
urce derived unless excluded from gross income by a provision ofthe Internal Revenue Code. See sec. 61(a). In the case ofSocial Security benefits, the amount included in gross income, ifany, is determined in accordance with the formula set forth in section 86. Under that formula, a portion ofthe benefits is includible in gross income if the sum ofthe taxpayer's modified adjusted gross income, as defined by section 86(b)(2), plus one-halfofthe amount ofSocial Security benefits received, exceeds c
taxpayers' case. Merely possessing the legal capability to sell * * * by obtaining a license from the inventor, without actual efforts to sell the products, is insufficient to constitute carrying on a trade or business for purposes ofsection 162."), § 86 T.C. 492 (1986); see also Kennedy v. Commissioner, T.C. Memo. 1973-15. - 13 - [*13] which an estimate may be made. Norgaard v. Commissioner, 939 F.2d 874, 879 (9th Cir. 1991), aff'g in part, rev'g in part T.C. Memo. 1989-390; Vanicek v. Commissi
1.36B-2(a), Income Tax Regs.; see also McGuire v.
1.36B-1(e)(2), Income Tax Regs.; see also sec.
Social Security disability benefits are treated in the same matter as other Social Security benefits. See sec. 86(d)(1); Thomas v. Commissioner, T.C. Memo. 2001-120, 2001 Tax Ct. Memo LEXIS 148, at *4. Benefits generally are included in gross income for the year in which they are received, even ifthe benefits are attributable to prior year
ome equals or exceeds the exemption amount to file a return. For 2011 the exemption amount was $3,700. Petitioner and Mrs. Hunter separated in November 2011. The taxability ofSocial Security benefits is calculated pursuant to a formula set forth in sec. 86. See McAdams v. Commissioner, 118 T.C. 373, 375-376 (2002). Under sec. 86, ifa taxpayer's "modified adjusted gross income", plus one halfof the Social Security benefits received during the taxable year, exceeds the "base amount", then a portio
Section 86 of the Revenue Act of 1862, ch. 119, 12 Stat. at 472, imposed a 3% tax on Federal employees whereas section 90, 12 Stat. at 473, ofthe same act imposed a 3% tax on "every person residing in the United States". The author makes an unfounded leap to conclude that by "identification in section 86 ofthe remuneration (pay) of government worke
This data entry error in turn caused respondentto recalculate, pursuant to the formula prescribed by section 86, the taxable amount ofpetitioners' Social Security benefits on line 20b from the amount reportedbypetitioners, $32,047, to $27,796.
86.¹ Petitioners hand-prepared a Federal income tax return, Form 1040, U.S. Individual Income Tax Return, for 2010, and timely filed it. Petitioners did not report the gross amount oftheir Social Securitybenefits, leaving line 20a ("Social Security.benefits") blank. However, petitioners did correctly report the taxable portion oftheir Social-S
ase, modified AGI under section 469(i)(3)(F) equals AGI after the application ofsection 469(c)(2) and (a), plus the deductions allowed under section 219 for qualified retirement contributions, less the taxable amount ofSocial Security benefits under section 86. See also sec. 1.469-9(j), Income Tax Regs. 1°The "active participation" standard is met as long as the taxpayer participates in a significant and bona fide sense in making management decisions or arranging for others to provide services s
t, including 6The applicable exemption amount for 2008 is $3,500. See Rev. Proc. 2007-66, sec. 3.19(1), 2007-2 C.B. 970, 975. Respondent concedes that after some or all ofher Social Security benefits are excluded from gross income in accordance with sec. 86, Ms. Saputa's gross income was less than the exemption amount. - 16 - income which is ordinarily excluded from gross income, such as Social Security benefits, must be taken into account in determining whetherthe taxpayerhas provided over one-
siness expense deductions will affect his adjusted gross income. Therefore, in the Rule. 155 computations the parties are to take into account that petitioner has to ir.clude in gross income only the portion of Social Security benefits prescribed by section 86. Deductions Deductions are a matter of legislative grace. See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 252 U.S. 435 (1934). A taxpayer must prove he is entitled to any d.eduction. See INDOPC
It is well established that SSD benefits are includable in income under section 86 and are not 2The stipulation of facts and the attached exhibits are incorporated herein by this reference.
August 21, 2009, the parties filed a joint motion for leave to - '3 - submit case under Rule 122 and a stipulation The Court granted the motion and struck the case from the September 14, 2009, Charleston, West Virgirnia, .trial ses.sio Discussion Since 1983, .section 86 has required some taxpayers to include a portion: of their Social Security benefits in their gross income for Federal income tax purposes : Reimels v.
004 .' On the record before us, we sustain respondent' s determination that during 2004 petition r received $18,986 16 of total Social Security benefits . The portion'of a taxpayer's tota l ocial Security benefits that is taxable is determined under section 86 . On the record before us, we find that petitioner has ailed to carry his burden of showing error in respondent's determ nation in the 2004 notice that $16,138 of the $18,986 of the tota Social Security benefits that he received during 200
Because of the adjusted gross .-income thresholds in section 86, Social Security and Tier 1 Railroad Retirement Benefits, the additional $26,170 in wagering income caused a computationa l increase to the portion of petitioner's $22,758 in Social Security benefits includable in income from $8,631 (38 percent) to $19,345 (85 percent) .
Taxability of the Social Security Benefits Section 86 contains a formula for taxing Social Security benefits .
1999-184 (section 86 does not violate the Ex Post Facto Clause of the U .S .
Green received Social Security benefits but, contrary to the mandate of section 86, did not report these benefits as gross income.
Social Security Benefits Section 86 taxes Social Security benefits pursuant to formula.
ng losses and charitable contributions, respectively. 3If the $44,833 gambling winnings are included in petitioner’s gross income, he must also include Social Security benefits received of $8,690 in his gross income for taxable year 2001 pursuant to sec. 86. - 3 - Petitioner timely filed his Federal income tax return for the 2001 taxable year. On Form 1040, U.S. Individual Income Tax Return, for taxable year 2001, petitioner reported capital gain income of $1,663.13. Petitioner did not report an
86 (a)(2), (c)(1) and (2). - 17 - that amount. Petitioner's unchallenged testimony at trial was that he purchased the same amount of lottery tickets each week, .at a cost of.approximately $80 per month, and that he began . saving his (losing) tickets after he won the $1,000 in March 2000. The $851 total for the tickets purchased from March th
t mistakenly concluded that petitioners had overreported their income by $3,807; i.e., the amount reported on line 13b as the taxable amount of Social Security benefits received. Respondent 3 The Worksheet reflects the statutory formula set forth in sec. 86 that determines the amount of Social Security benefits that is includable in the taxpayer’s gross income. 4 The parties agree that petitioners’ reported tax liability of $4,256 represents petitioners’ correct tax liability for 1999. - 4 - the
Social Security Section 86 taxes Social Security benefits pursuant to a formula.
of accounting who owns United 1 The notice of deficiency also contains an adjustment to income of $4,281 with respect to taxable Social Security benefits. The adjustment results from an increase in petitioner’s “modified adjusted gross income” under sec. 86 due to the inclusion of unreported bond interest of $10,255. The adjustment also relies upon a Form 1099-SSA to assume that petitioner received Social Security benefits of “$14,130” during the 2000 taxable year. However, petitioner disputed t
ecs. 1(a)(1), 7701(a)(1), (14), and that compensation for labor or services rendered constitutes income subject to the Federal income tax, sec. 61(a)(1); United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981); see also sec. 61(a)(3), (4), (7); sec. 86. We likewise reject petitioner’s argument that the Appeals officer failed to obtain verification from the Secretary that the requirements of all applicable laws and administrative procedures were met as required by section 6330(c)(1). The rec
Federal income tax, see secs. 1(a)(1), 7701(a)(1), (14), and that compensation for labor or services rendered constitutes income subject to the Federal income tax, sec. 61(a)(1); United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981); see also sec. 86 regarding the taxability of unemployment compensation. We likewise reject petitioner’s argument that the Appeals officer failed to obtain verification from the Secretary that the requirements of all applicable laws and administrative procedur
the taxes owed but believes he should not have to pay any interest because he alleges the Government did not send him a Form 1099-SSA setting forth the amount of his taxable benefits. Social Security benefits are taxable to the extent provided under section 86. We note that taxable income must be reported regardless of whether a Form 1099 is received. Moreover, this Court does not have jurisdiction to redetermine interest prior to the entry of a decision redetermining the deficiency. Sec. 7481(c
ince 1983, railroad retirees have been taxed on two categories of benefits. See Railroad Retirement Solvency Act of 1983, Pub. L. 98-76, 97 Stat. 411. “Tier 1” benefits are taxed in the same manner as Social Security benefits under the provisions of section 86. See sec. 86(d)(1)(B). “Tier 2” benefits are taxed in the same manner as pension benefits provided under an employer plan that meets the requirements of section 401(a). See sec. 72(r). - 5 - Petitioners challenge the validity of respondent
- 2 - section 86(a), or whether, as petitioners contend, such benefits are excludable from gross income under sections 104(a)(3) and 105(3).2 If the Court holds that such benefits are includable in income, petitioners contend that section 86 violates the Equal Protection Clause of the U.S.
two programs, identified as Tier I and Tier II benefits. Tier I benefits are essentially the equivalent of Social Security benefits and are distributed in the same amount as Social Security benefits. Tier I benefits are taxed under the provisions of section 86. If, however, Tier I benefits are paid as compensation for injuries or sickness, the payments are not taxable pursuant to section 104. Tier II benefits, which are in the nature of pension benefits, are taxed under the provisions of section
Subsequently, respondent concluded that such benefits do not have tax consequences to petitioners in 1996, and respondent conceded the deficiency in full.5 OPINION Petitioners seek relief that goes beyond respondent’s concession that petitioners are not liable for any deficiency in income tax for 1996. Basically, petitioners request the Co
101 and following)." Section 79 uses the same articulation as section 83 in providing that the cost of employees' group-term life insurance "shall be included in the gross income" of employees.
ving expenses under section 82. Other Code sections convey the same meaning by different terms such as providing that “gross income includes” alimony (section 71), annuities (section 72), prizes and awards (section 74), and Social Security benefits (section 86). Section 80(a) provides that the restoration of value of certain securities “shall, except as provided in subsection (b), be included in gross income”. Subsection (b) then provides for reducing “The amount otherwise includible in gross in
e not taxable. This, however, is simply not the case. Since 1983, railroad retirees have been taxed on two categories of benefits. "Tier 1 benefits", which are treated in the same manner as Social Security benefits, are taxed under the provisions of section 86. "Tier 2 benefits", which are in the nature of pension benefits, are taxed under the provisions of section 72(r). See Ernzen v. United States, 875 F.2d 228 (9th Cir. 1989); Wallers v. United - 3 - States, 847 F.2d 1279 (7th Cir. 1988); Bra
on, annuity, or similar allowance for personal injuries or sickness resulting from active service in the Armed Forces of any country". Pertinent portions of section 104(a)(4) and related portions of section 104(b) are set forth in the margin.2 1 See sec. 86. 2 Sec. 104. Compensation for injuries or sickness. (a) In General. * * * gross income does not include-- * * * * * * * (4) amounts received as a pension, annuity, or similar allowance for personal injuries or (continued...) - 6 - The princip