- 3 - Nerilyn A. Dela Cruz, received Social Security benefits of $3,931. Petitioners filed a joint Federal income tax return in 1997 and reported $70,601 in adjusted gross income in that year, excluding the Social Security 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 plus half of the Social Security benefits received is greater than $32,000 must include a portion of the benefits in their income. Sec. 86(a) through (c). Benefits generally are included in income in the year in which they are received, even if the benefits are attributable to prior years. Secs. 86(e), 451(a). The portion included in income, never exceeding 85 percent, varies according to a formula set forth in section 86(a). Petitioners had modified adjusted gross income of at least $70,601, see sec. 86(b)(2), and received benefits of $11,316. Because their modified adjusted gross income plus half 2Respondent also determined that petitioners had unreported income of $38 in dividends. Petitioners concede this amount.Page: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011