Millard D. and Marjorie C. Thomas - Page 6
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Mr. Thomas’s Notice of Pension Award, dated May 22, 1996,
provided that Mr. Thomas was entitled to a monthly benefit level
of $483, and was awarded a monthly disability pension of $498,
retroactive to March 1, 1996, which was the “Effective Date”.
Petitioners have never included Mr. Thomas’s disability
pension in their gross income. In 1999, respondent examined Mr.
Thomas’s Federal income tax return and accepted his position that
his disability pension benefits were nontaxable.5 In both 2002
and 2003, Mr. Thomas received $5,976 in disability pension
benefits, which respondent now contends are includable in
petitioners’ gross income.
5In Megibow v. Commissioner, T.C. Memo. 2004-41, affd. 161
Fed. Appx. 98 (2d Cir. 2005), this Court observed:
From a legal standpoint, income taxes are levied
on an annual basis, such that each year represents a
new liability and a separate cause of action.
Commissioner v. Sunnen, 333 U.S. 591, 598-600 (1948);
Fla. Peach Corp. v. Commissioner, 90 T.C.  682
[(1988)]. Given this principle, collateral estoppel
would not operate to establish entitlement to
deductions in one year based merely on an allowance of
similar deductions in a different year or years. See
Barmes v. Commissioner, T.C. Memo. 2001-155 (rejecting
attempts to apply collateral estoppel to depreciation
deductions based on a prior litigated tax year), affd.
89 AFTR 2d 2002-2249, 2002-1 USTC par. 50,312 (7th Cir.
2002); see also Adolph Coors Co. v. Commissioner, 519
F.2d 1280, 1283 (10th Cir. 1975) (rejecting an attempt
to apply collateral estoppel even though the exact
issue was raised in a prior Tax Court proceeding but,
because the Commissioner abandoned the issue during the
litigation, no judicial determination or findings were
made), affg. 60 T.C. 368 (1973).
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Last modified: November 10, 2007