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their income. Sec. 86(a) through (c). The portion included in
income, never exceeding 85 percent, varies according to a formula
set forth in section 86(a). This formula uses variables known as
“base amount” and “adjusted base amount”, which are defined under
section 86(c). Under the general rule, the former is $25,000 and
the latter is $34,000. Sec. 86(c)(1)(A) and (2)(A). However,
with respect to a married taxpayer who does not file a joint
return and who “does not live apart from his spouse at all times
during the taxable year,” both of these amounts are zero. Sec.
86(c)(1)(C) and (2)(C).
Respondent argues that petitioner lived with his wife for a
portion of 1997, causing the benefits he received to fall under
the special rule of section 86(c)(1)(C) and (2)(C). To this
effect, respondent asserts that petitioner admitted prior to
trial that he had lived with her for a few days in 1997.
Petitioner denies making such an admission. He testified at
trial that he returned to California on 2 days in connection with
a workers’ compensation issue, but that he did not “live” with
his spouse during that period. No evidence was admitted of an
admission by petitioner or which otherwise contradicts
petitioner’s testimony. We accept petitioner’s testimony and
have found, as detailed above, that petitioner and his wife lived
4(...continued)
joint return, and who do not live apart from their spouses at all
times during the year. Sec. 86(c)(1).
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