Stephen Daryl Royal - Page 2

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          2002.  The issues remaining for decision are:2                              
               (1) Is petitioner required to include $25,940.49 in his                
          gross income for his taxable year 2002?  We hold that he is.                
               (2) Is petitioner entitled for his taxable year 2002 to the            
          earned income tax credit?  We hold that he is not.                          
                                     Background                                       
               Virtually all of the facts have been stipulated by the                 
          parties and are so found.                                                   
               At the time petitioner filed the petition in this case, his            
          legal residence was in Baltimore City, Maryland.                            
               During 2002, petitioner was an employee of the U.S. Postal             
          Service (Postal Service) until he retired in that year because of           
          disability.                                                                 
               The U.S. Office of Personnel Management (OPM) approved                 
          petitioner’s retirement from the Postal Service because of                  
          disability.  In a letter dated July 29, 2002, OPM advised peti-             
          tioner as follows:                                                          
               Your application for disability retirement has been                    
               approved.                                                              
               According to information we have received from your                    
               agency, you have not been separated from Government                    
               service.  Therefore, we are notifying your agency of                   
               the approval and asking them to separate you.  We are                  
               asking them to give us your last day of pay.  Payment                  
               of annuity cannot start until after your last day of                   
               pay.  If you have sick leave remaining, the last day of                
               pay will be the day your sick leave is exhausted.  We                  

               2At trial, petitioner conceded the accuracy-related penalty            
          under sec. 6662(a) that respondent determined.                              




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