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Married taxpayers filing a joint return whose modified
adjusted gross income, plus one-half of their Social Security
benefits, exceeds $44,000 must include up to a maximum of 85
percent of their Social Security benefits in their gross income.
See sec. 86(a), (b), and (c).
Respondent determined that 85 percent of the Social Security
benefits petitioner received for 2001 is includable in
petitioners’ gross income. Petitioners do not dispute that
petitioner received worker’s compensation benefits in the amount
by which her Social Security benefits were offset. Petitioners,
however, argue that the Social Security Administration never paid
the benefits reported as worker’s compensation offset, and thus
those amounts should not be included in petitioners’ gross
income.
Section 86(d)(3) clearly provides that such offsets are
Social Security benefits for purposes of determining gross
income:
if * * * any social security benefit is reduced by reason of
the receipt of a benefit under a workmen’s compensation act,
the term “social security benefit” includes that portion of
such benefit received under the workmen’s compensation act
which equals such reduction.
Section 86 was added to the Internal Revenue Code by the
Social Security Amendments of 1983, Pub. L. 98-21, sec. 121, 97
Stat. 80. The House report states in relevant part:
social security benefits potentially subject to tax will
include any workmen’s compensation whose receipt caused a
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Last modified: May 25, 2011