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The latter method requires taxpayers to maintain adequate records
substantiating their investment in the retirement plan and the
amounts previously excluded from income. Apparently, because
Social Security covers a substantially larger population,
Congress eliminated this record-keeping requirement, simplifying
the task of reporting for the vast majority of taxpayers. Thus,
except as provided in section 86(f), there is no provision in
section 86 for treating Social Security benefits as an annuity or
pension subject to section 72.2
In essence, petitioners question the fairness of section 86.
However, this is not the proper forum to question the policy
considerations that impelled the enactment of this legislation.
“Normally, a legislative classification will not be set aside if
any state of facts rationally justifying it is demonstrated to or
perceived by the courts.” United States v. Maryland Savings-
Share Ins. Corp., 400 U.S. 4, 6 (1970). The legislative history
of section 86, as enacted in 1983, demonstrates that Congress had
a valid and rational basis for the distinctions made in the
statute:
By taxing only a portion of social security and
railroad retirement benefits (that is, up to one-half
2 Sec. 86(f) provides the Social Security benefits may be
treated for Federal tax purposes as a pension or annuity only for
purposes of sec. 22(c)(3)(A), relating to the credit for the
elderly and the permanently and totally disabled; sec. 32(c)(2),
relating to the earned income credit; sec. 219(f)(1), relating to
the deduction for retirement savings; and sec. 911(b)(1),
relating to the foreign earned income exclusion.
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Last modified: May 25, 2011