Peter John Mihok - Page 5




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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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