Frank J. Zavatto - Page 3

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               Respondent determined a deficiency of $3,348 in petitioner’s           
          1997 Federal income tax.  The issue for decision is whether any             
          portion of the Social Security benefits paid to petitioner in               
          1997 are includable in his income for that year.                            
               Some of the facts have been stipulated and are so found.  At           
          the time the petition was filed, petitioner resided in Mountain             
          View, California.                                                           
               After he retired in 1992 at the age of 62, petitioner                  
          applied for and began to receive Social Security benefits.  In              
          1995, petitioner became reemployed and continued working                    
          throughout 1997, during which period he also continued to receive           
          Social Security benefits.  During the year in issue, he was paid            
          Social Security benefits totaling $13,865.                                  
               As a result of the other income earned by petitioner each              
          year during the years 1995 through 1997, petitioner was overpaid            
          Social Security benefits of $20,395.30 (the overpayment), which             
          included the amount of benefits petitioner received in 1997.                
          Consequently, the Social Security Administration (SSA) began to             
          withhold Social Security benefits to which petitioner was                   
          otherwise entitled in order to recover the overpayment.  The SSA            
          recovered $1,702 of the overpayment in 1997 and continued to                
          withhold all or part of petitioner’s Social Security benefits in            
          1998 and 1999.  As of the date of trial, petitioner had not                 

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