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Petitioners did not challenge respondent's assertion regarding
the information return by DFAS to Mr. Simon.4
For the year in question, as well as in prior years,
petitioners did not include the retirement benefits received from
DFAS as income on their Federal income tax returns. In an audit
during 1987 of petitioners' 1981, 1984, and 1985 tax returns,
respondent's examining agent had proposed including in income the
retirement benefits petitioner received from DFAS; however, at
respondent's appellate division level, the proposal of the
examining agent was reversed.
For the year at issue, respondent determined in the notice
of deficiency that the 1994 retirement benefits to petitioner
were includable in gross income. Respondent made no allowance or
credit for the amount withheld as Federal income tax from
petitioner's portion of the retirement benefits. As noted
4 Mr. Simon, on his Federal income tax return for 1994,
reported the full amount of the retirement benefits and claimed
an alimony deduction in the amount of $15,564. Respondent issued
a notice of deficiency to Mr. Simon disallowing the claimed
deduction, and a petition was filed on behalf of his estate in
this Court challenging that determination. Estate of Robert V.
Simon, Deceased, Kathleen L. Nailor, Executrix v. Commissioner,
docket No. 3549-01S. A stipulated decision was entered in that
case on Oct. 18, 2002, which provides "That there is no
deficiency in income tax due from petitioner or overpayment due
to petitioner for the taxable year 1994." The record of that
case does not include any information return from DFAS relating
to the retirement benefits in question; however, respondent
allowed a reduction of the benefits taxable to Mr. Simon for the
amount paid to petitioner.
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