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the benefits are attributable to 1998, 1999, 2000, and 2001. The
benefits include reimbursed attorney’s fees of $4,000.
Petitioner received a Form SSA-1099, Social Security Benefit
Statement, for 2001. In box 5 of that form “Net Benefits” of
$43,494 are reported. The Form SSA-1099 stated, in pertinent
part, that “Part of your Social Security benefits shown in box 5
may be taxable income.”
In addition to other income, petitioners earned $293 of
interest income during 2001.
On August 15, 2002, petitioners filed a joint 2001 Federal
income tax return that was prepared by one or both of them.
On that return petitioners reported adjusted gross income of
$53,497, which amount includes all but $87 of the interest income
they earned during 2001, but does not include any portion of the
benefits.
In the notice of deficiency, respondent determined that
$30,585 of the benefits is includable in petitioners’ 2001
income. Respondent further determined that petitioners failed to
include $87 of interest income on their 2001 return. Other
adjustments made in the notice of deficiency are not in dispute.
Discussion
Section 61(a) provides that, except as otherwise provided by
law, gross income includes all income from whatever source
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