                   T.C. Summary Opinion 2006-101



                      UNITED STATES TAX COURT



         RANDY GENE AND KATHIE J. SHREVE, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1177-05S.              Filed July 10, 2006.



     Randy Gene and Kathie J. Shreve, pro se.

     Robert W. Dillard, for respondent.


     WELLS, Judge:   This case was heard pursuant to the

provisions of section 7463 in effect at the time the petition was

filed.   The decision to be entered is not reviewable by any other

court, and this opinion should not be cited as authority.   Unless

otherwise indicated, all section references are to the Internal

Revenue Code, as amended.
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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


     1
      At trial, petitioners conceded that they owe tax on certain
interest income and a State tax refund.
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petitioner, respondent determined that petitioner’s disability

benefits were taxable.     Petitioners timely petitioned this Court.



                              Discussion

     Petitioner contends that the disability benefits petitioner

received under a workmen’s compensation act are not taxable

because they were not paid by the Social Security Administration.

We disagree.

     Gross income includes all income from whatever source

derived unless excluded by a provision of the Internal Revenue

Code.    Sec. 61(a).   Section 86(a) provides that gross income

includes Social Security benefits in an amount equal to a

prescribed formula.2    Social Security benefits mean any amount

received by a taxpayer by reason of entitlement to a monthly

benefit under title II of the Social Security Act.     Sec.

86(d)(1)(A).    Title II of the Social Security Act provides for

disability benefits.     See 42 U.S.C. secs. 401-434 (2000).

     Prior to 1984, disability payments received by a taxpayer

who retired due to a permanent disability were excluded from

gross income pursuant to section 105(d).     The Social Security

Amendments of 1983, Pub. L. 98-21, sec. 122(b), 97 Stat. 87,

repealed section 105(d) and the limited exclusion of disability


     2
      Petitioners have not challenged the formula provided in
sec. 86(a).
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benefits for tax years beginning after 1983.       Since 1984, Social

Security disability benefits have been taxed in the same manner

as other Social Security benefits and subject to tax pursuant to

section 86.   Sec. 86(d)(1); Thomas v. Commissioner, T.C. Memo.

2001-120 (and cases cited therein).       A reduction of Social

Security disability benefits due to the receipt of benefits under

a workmen’s compensation act does not reduce the total amount of

taxable Social Security benefits.    Sec. 86(d)(3); Mikalonis v.

Commissioner, T.C. Memo. 2000-281.       Accordingly, we hold the

amounts petitioner received under the workmen’s compensation act

are includable in their gross income as taxable Social Security

disability benefits.

     To reflect the foregoing,


                                              Decision will be entered

                                         for respondent.
