Frank J. Zavatto - Page 4

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          repaid the entire amount of the overpayment.                                
               On his 1997 Federal income tax return, petitioner reported             
          adjusted gross income of $102,279, which does not include any of            
          the Social Security benefits paid to petitioner during that year.           
               In the notice of deficiency, respondent determined that a              
          portion of the Social Security benefits received by petitioner in           
          1997 are includable in his income for that year.  Other                     
          adjustments made in the notice of deficiency are not in dispute.            
               The extent to which Social Security benefits are includable            
          in a taxpayer’s income is determined pursuant to a formula that             
          takes into account the amount of the taxpayer’s Social Security             
          benefits, the amount of the taxpayer’s other income, and the                
          taxpayer’s filing status.  See sec. 86.  For purposes of the                
          computation contemplated by the formula, the amount of Social               
          Security benefits received by a taxpayer during any taxable year            
          is “reduced by any repayment made by the taxpayer during the                
          taxable year of a social security benefit previously received by            
          the taxpayer (whether or not such benefit was received during the           
          taxable year).”  Sec. 86(d)(2).                                             
               The deficiency here in dispute was properly computed in                
          accordance with section 86, and petitioner does not contend                 
          otherwise.  Instead, petitioner disputes the deficiency because             
          it is based upon Social Security benefits that he is required to            
          repay.  According to petitioner, because of his obligation to               

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