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California, filed their petitions relating to 2001 and 2000,
respectively. On July 14, 2005, the Court granted respondent’s
motion to consolidate docket Nos. 2475-04 and 4970-05 for
purposes of trial, briefing, and opinion.
OPINION
Section 861 requires the inclusion in gross income of up to
85 percent of Social Security benefits received. See Reimels v.
Commissioner, 123 T.C. 245, 247-248 (2004), affd. 436 F.3d 344
(2d Cir. 2006). In 2000 and 2001, Mrs. Green received Social
Security benefits but, contrary to the mandate of section 86, did
not report these benefits as gross income. Petitioners contend
that the Social Security benefits paid to Mrs. Green in 2000 and
2001 were paid in lieu of workmen’s compensation, and thus,
pursuant to section 104, are excludable from gross income.2
Section 104 states that gross income shall not include those
“amounts received under workmen’s compensation acts as
compensation for personal injuries or sickness”. Sec. 104(a)(1).
Section 1.104-1(b), Income Tax Regs., excludes from income those
payments received “under a statute in the nature of a workmen’s
compensation act which provides compensation to employees for
1 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue.
2 Sec. 7491(a) is applicable. Our conclusions, however,
are based on a preponderance of the evidence, and thus the
allocation of the burden of proof is immaterial. See Martin Ice
Cream Co. v. Commissioner, 110 T.C. 189, 210 n.16 (1998).
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