Randy Gene and Kathie J. Shreve - Page 3

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               Respondent determined a deficiency in Federal income tax for           
          petitioner’s 2002 taxable year.  After concessions,1 the sole               
          issue for decision is whether certain disability benefits                   
          received by petitioner Randy Gene Shreve (petitioner) under a               
          workmen’s compensation act are includable in gross income                   
          pursuant to section 86(a).                                                  
                                     Background                                       
               Some of the facts and certain exhibits have been stipulated.           
          The parties’ stipulations of fact are incorporated in this                  
          opinion by reference and are found as facts in the instant case.            
          At the time of filing the petition in the instant case,                     
          petitioners resided in Fernandina Beach, Florida.  Petitioner is            
          disabled and receives disability benefits from the Social                   
          Security Administration and under a workmen’s compensation act              
          (workmen’s compensation act).  Petitioners filed their 2002 tax             
          return but did not report as income any Social Security                     
          disability benefits.  However, based on a Form SSA-1099, Social             
          Security Benefit Statement, respondent determined that petitioner           
          had received $7,537 in taxable disability benefits during 2002,             
          of which the Social Security Administration directly paid                   
          petitioner $1,512 and the remainder was received under a                    
          workmen’s compensation act.  In the notice of deficiency sent to            


               1At trial, petitioners conceded that they owe tax on certain           
          interest income and a State tax refund.                                     





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