Blaney H. Howle III and Polly T. Howle - Page 5




                                        - 4 -                                         
               By notice dated September 20, 1999 (September notice), the             
          IRS proposed to change petitioners’ 1997 return to include                  
          unreported pension income.  The proposed changes appear to have             
          been brought about by review of petitioners’ return and the                 
          information returns submitted to the IRS by the Railroad                    
          Retirement Board.  Petitioners disagreed with the proposed                  
          changes set forth, and the IRS realized that the proposed changes           
          failed to include $515 of the taxable Tier 1 railroad retirement            
          benefits.                                                                   
               By letter dated December 2, 1999, the IRS acknowledged that            
          the changes proposed in its September notice were incorrect and             
          proposed revised changes to petitioners’ 1997 return (December              
          proposed changes).  The December proposed changes are the basis             
          for the statutory notice of deficiency issued petitioners on                
          April 7, 2000.                                                              
                                     Discussion                                       
               Since 1983, railroad retirees have been taxed on two                   
          categories of benefits.  See Railroad Retirement Solvency Act of            
          1983, Pub. L. 98-76, 97 Stat. 411.  “Tier 1” benefits are taxed             
          in the same manner as Social Security benefits under the                    
          provisions of section 86.  See sec. 86(d)(1)(B).  “Tier 2”                  
          benefits are taxed in the same manner as pension benefits                   
          provided under an employer plan that meets the requirements of              
          section 401(a).  See sec. 72(r).                                            






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  Next

Last modified: May 25, 2011