Roger G. and Lilianne J. G. Maki - Page 3

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          886-A,2 involving an audit of petitioners' 1987 tax year.  Form             
          886-A, was a handwritten statement addressed to petitioners and             
          stated the following:                                                       
                    The enclosed information indicates that the income                
               is considered taxable Social Security Benefits and not                 
               disability payments that are non-taxable.  You will                    
               receive a refund for the amount you overpaid if you owe                
               no other taxes.                                                        
          The Form 886-A was the enclosure referenced on petitioners' 1991            
          Federal income tax return.  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.                                                   
               The first issue for decision is whether petitioner's Social            
          Security disability payments are taxable pursuant to section 86.            
          We begin by noting that petitioners have the burden of proving              
          that respondent's determination is in error.  Rule 142(a); Welch            
          v. Helvering, 290 U.S. 111 (1933).                                          
               Before 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).3  However, the Social Security Act Amendments of            
          1983 repealed the limited exclusion of disability payments                  


          2         Agreement as to Final Determination of Tax Liability.             
          3         Sec. 105(d) was repealed effective for taxable years              
          after 1983 by the Social Security Act Amendments of 1983, Pub. L.           
          98-21, sec. 122(b), 97 Stat. 85.                                            




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