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On their 2000 joint Federal income tax return, petitioners
included none of the military retirement payments in their gross
income. By notice of deficiency dated February 10, 2003,
respondent determined that $12,962 of military retirement
payments was includable in petitioners’ 2000 gross income.2
Discussion
Gross income generally includes income from pensions,
including military retirement benefits. Sec. 61(a)(11); secs.
1.61-2(a)(1), 1.61-11(a), Income Tax Regs. Such pension income
is generally taxed to the owner of the pension (and not
necessarily to the recipient), in accordance with the well-
established principle that income from property is taxed to the
owner of the property. Eatinger v. Commissioner, T.C. Memo.
1990-310 (citing Helvering v. Clifford, 309 U.S. 331 (1940); Poe
v. Seaborn, 282 U.S. 101 (1930); Lucas v. Earl, 281 U.S. 111
(1930)).
2 Petitioner alleges, and respondent does not dispute, that
each year since 1995 petitioner has disclosed on her Federal
income tax returns her receipt of the military pension payments
and included a notation stating her reasons for excluding them
from gross income. Petitioner alleges, and respondent does not
dispute, that after respondent initially questioned her exclusion
of the military pension payments for 1998 and petitioner sent
respondent a letter explaining her reasons for claiming the
exclusion, petitioner received a “Closing Letter” from respondent
dated Nov. 2, 2000, wherein respondent accepted petitioner’s
explanation and allowed the exclusion of the military pension
payments from gross income for 1998. Petitioner alleges, and
respondent does not dispute, that a copy of this “Closing Letter”
was attached to petitioners’ 2000 joint Federal income tax
return.
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