Bernard J. Penn and Thelma I. Penn - Page 7




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          aggregate amount of $701 as reflected on Forms 1099 from                    
          Southwest Trust Bank ($457) and Bank of Pensacola ($244).                   
          Accordingly, we find petitioners have failed to meet their burden           
          of proving that respondent’s determination regarding the                    
          foregoing was erroneous, and we sustain it.  See Rule 142(a);               
          Welch v. Helvering, 290 U.S. 111 (1933).6                                   
          Issue 2. Social Security Payments                                           
               Respondent determined that during 1996 petitioners received            
          $8,496 in Social Security benefit payments and failed to include            
          85 percent of such payments ($7,222) in their gross income as               
          required by section 86.  Section 86 requires the inclusion of a             
          portion of Social Security benefits in gross income when the sum            
          of the benefit recipient’s “modified” adjusted gross income plus            
          one-half of his or her Social Security benefits exceeds certain             
          threshold amounts.  When, in the case of a joint return, this sum           
          exceeds $32,000, the lesser of such excess or 50 percent of the             
          Social Security benefits must be included in income.  Sec.                  
          86(a)(1), (c)(1)(B).  When modified adjusted gross income exceeds           
          $44,000 in the case of a joint return, up to 85 percent of the              
          Social Security benefits received during the year must be                   
          included in gross income.  Sec. 86(a)(2), (c)(2)(B).   Under                
          section 86, modified adjusted gross income in general equals                
          adjusted gross income plus tax-exempt interest income received              


               6 See supra note 4.                                                    




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