- 4 -
1998 1999
Line 8a. Taxable interest [1]$980.00 $1,037.99
Line 9. Ordinary dividends 6,265.99 6,395.04
Line 13. Capital gain or (loss) 14,473.86 19,902.36
Line 15a. Total IRA distributions$85,630.90 ---
Line 15b. Taxable amount 21,407.73 [2]21,407.50
Line 33. Adjusted gross income 43,127.58 48,742.89
1 In 1998, petitioners originally reported $1,016.20 of interest income
but actually received only $980. See supra note 2.
2 We note that in 1999 petitioners reported only $21,407.50 as
conversion income instead of $21,407.73. There is nothing in the record to
explain this discrepancy.
On their returns for 1998 and 1999, petitioners did not
report that they received any Social Security benefits, nor did
they report that any portion of their benefits was taxable.
D. Respondent’s Deficiency Notices
In the notices of deficiency, respondent determined that
petitioners received, but failed to report, taxable Social
Security benefits of $7,434 for 1998 and $13,500 for 1999, which
resulted in the deficiencies at issue. Respondent concluded that
petitioners’ conversion income is included in income pursuant to
section 408A and, therefore, that petitioners’ Social Security
benefits are taxable pursuant to section 86.
Discussion3
A. Petitioners’ Contention
In their petition, petitioners contend that respondent erred
because:
3 We need not decide whether sec. 7491, concerning burden
of proof, applies to the present case because the facts are not
in dispute and the issue is one of law. See Higbee v.
Commissioner, 116 T.C. 438 (2001).
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