Mitchell Wayne Andrew and Nancy Rae Patten - Page 5

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          the adjusted base amount, then gross income includes the lesser             
          of:  (1) The sum of (a) 85 percent of such excess, plus (b) the             
          lesser of (i) one-half of the Social Security benefits received             
          during the year or (ii) one-half of the difference between the              
          adjusted base amount and the base amount of the taxpayer; or (2)            
          85 percent of the Social Security benefits received during the              
          taxable year.3  See sec. 86(a)(2).  With respect to married                 
          taxpayers who file a joint return for 2000, as petitioners did,             
          the base amount and the adjusted base amount are $32,000 and                
          $44,000, respectively.  Sec. 86(c)(1)(B) and (2)(B).                        
               Social Security benefits are included in the recipient’s               
          gross income in the taxable year in which the benefits are                  
          received.  Sec. 86(a)(1).  An election may be made by a taxpayer            
          who receives a lump-sum payment of Social Security benefits                 
          during the taxable year in which a portion of the benefits is               
          attributable to previous taxable years.  Sec. 86(e).  Section               
          86(e) provides that, if the election is made, the amount included           
          in gross income for the taxable year of receipt must not exceed             
          the sum of the increases in gross income for those previous                 
          taxable years that would result from taking into account the                

               3  Before 1984, certain disability benefits were excludable            
          from an employee’s gross income under sec. 105.  However, this              
          section was repealed, and “since 1984 Social Security disability            
          benefits have been treated in the same manner as other Social               
          Security benefits.”  Maki v. Commissioner, T.C. Memo. 1996-209.             






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