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On his Federal income tax return for 1998, petitioner did
not include in gross income any Social Security retirement
benefits for that year. In the notice of deficiency, respondent
determined that the net Social Security benefits of $10,192 paid
to petitioner during 1998 constituted income, and, pursuant to
section 86(a), $8,663.20 of that amount was taxable income.
Petitioner does not dispute the net amount of $10,192 he received
during 1998. He argues, however, that the net amount paid to him
includes amounts representing an overpayment to him for his
excess earnings during 1998, and, therefore, he should not be
liable for income tax on benefits that have to be paid back to
the Social Security Administration through reductions in his
Social Security benefits in subsequent years.
There is no dispute that, under the formula provided in
section 86(a), the taxable portion of petitioner's Social
Security benefits for 1998 is $10,192, the net amount petitioner
received after the reduction of $12,355 for overpayments in
benefits for years prior to 1998. Additionally, there is no
dispute that petitioner's earnings during 1998 were also in
excess of allowable earnings for that year that would cause
Social Security benefits payable in future years to be reduced to
offset the excess benefits paid to petitioner during 1998. As
noted above, petitioner's argument is that, because some of the
net benefits paid to him during 1998 will be affected because of
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