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1998 Federal income taxes in the amounts of $3,625 and $1,526,
respectively. Petitioners conceded that they had unreported
income in the amounts of $748 in 1997 and $54 in 1998. The sole
issue the Court must decide is whether Social Security disability
payments are includable in gross income.
Some of the facts in this case have been stipulated and are
so found. Petitioners resided in Las Vegas, Nevada, at the time
they filed their petition.
Petitioners timely filed their joint 1997 Federal tax return
(1997 return). Petitioners reported adjusted gross income of
$51,316 on their 1997 return.
Petitioners timely filed their joint 1998 Federal tax return
(1998 return). Petitioners reported adjusted gross income of
$66,049 on their 1998 return.
Petitioner Micki Nicholas (petitioner) received Social
Security disability benefits in 1997 of $17,587. Portions of the
amount received in 1997 included unpaid disability claims for the
taxable years 1994, 1995, and 1996. Petitioner also received
$6,249 in Social Security disability benefits during 1998.
Petitioners did not report any portion of the disability benefits
received in 1997 and 1998 on their respective Federal income tax
returns.
Petitioners contend that the Social Security disability
benefits are not taxable and, additionally, that a portion of the
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