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The issues for decision are: (1) Whether, and to what
extent, payments received by petitioner Larry G. Horst from the
Railroad Retirement Board in 1996 constitute taxable income; and
(2) whether petitioners failed to report taxable dividend and
interest income received in 1996. At the time of filing the
petition, petitioners resided in Sharpsburg, Maryland.
Background
Petitioner Larry G. Horst (petitioner) was employed by CSX
Transportation (CSX). On August 3, 1993, petitioner ceased work
with CSX due to injuries sustained in his employment. Petitioner
filed a claim for disability annuity payments with the U.S.
Railroad Retirement Board (RRB). Prior to 1996, petitioner
received interim payments totaling $9,492 pending resolution of
the claim. On July 1, 1996, petitioner was advised by the RRB
that he was entitled to receive an annuity. The monthly annuity
payments were classified by the RRB as follows:
Effective Date Tier I Tier II Total
2/1/94 $1,071 $185.10 $1,256.10
12/1/94 1,101 186.77 1,287.77
12/1/95 1,130 188.26 1,318.26
In 1996, petitioner received $34,341 ($43,833 less the
interim payments of $9,492) from the RRB. The annuity benefits
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