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Immediately upon his return, the Navy submitted the paperwork for
petitioner’s retirement. In 1988, petitioner retired from the
Navy. Effective September 29, 1988, petitioner started receiving
a pension, disability benefits under CSRS, from OPM.
Sometime in the mid to late 1990s, petitioner applied for VA
disability. His application was denied.
During 1999, petitioner received $13,380 from OPM as
disability benefits under CSRS. OPM reported the distribution to
respondent on its Form 1099R, Statement of Annuity Paid. The
distribution code on the Form 1099R was listed as “3-DISABILITY”.
Petitioners did not report the $13,380 on their 1999 joint
Federal income tax return.
OPINION
Section 7491(a) places the burden of proof on the
Commissioner with regard to certain factual issues. Higbee v.
Commissioner, 116 T.C. 438, 440 (2001). Respondent concedes that
section 7491 is applicable to this case.
Respondent argues that petitioners have neither introduced
credible evidence, pursuant to section 7491(a)(1), nor satisfied
the prerequisites of section 7491(a)(2). H. Conf. Rept. 105-599,
at 240, 242 (1998), 1998-3 C.B. 747, 994, 996 (the burden is on
the taxpayer to show that he satisfied the prerequisites of
section 7491(a)(2)). On the instant record, we agree with
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