                     T.C. Summary Opinion 2005-66



                        UNITED STATES TAX COURT



              KIM ANTHONY POLONCZYK, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 17434-04S.              Filed May 26, 2005.



     Kim Anthony Polonczyk, pro se.

     Rebecca Dance Harris, for respondent.



     COHEN, Judge:    This case was heard pursuant to the

provisions of section 7463 in effect when 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.

     Respondent determined a deficiency of $1,400 in petitioner’s

Federal income tax for 2002 that was attributable to three items

of unreported income.    The issues for decision are:
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     (1) Whether petitioner’s unemployment compensation is

taxable under section 85;

     (2) whether petitioner had interest income from his checking

account with Forth Worth City Credit Union; and

     (3) whether petitioner had taxable income from a Farmers New

World Life Insurance Co. distribution.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.

                            Background

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioner resided in San Antonio, Texas, at the time that he

filed his petition.

     On April 15, 2003, petitioner timely filed Form 1040, U.S.

Individual Income Tax Return, for the income tax year 2002.

Petitioner reported $15,227.70 of IRA distributions and

$11,037.30 of itemized deductions on the Form 1040.   Petitioner

did not report any other income for 2002.

     On May 17, 2004, the Internal Revenue Service (IRS) sent to

petitioner a statutory notice of deficiency for $1,400 for 2002.

The IRS determined that petitioner did not report $4,466 of

unemployment income from the Texas Workforce Commission (Texas
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Workforce), $13 of interest income from Fort Worth City Credit

Union (the credit union), and $32 of taxable income from a

Farmers New World Life Insurance Co. (Farmers) distribution.

     The IRS relied on a Form 1099-G, Certain Government

Payments, in determining that petitioner had received $4,466 of

unemployment compensation from the Texas Workforce in 2002.

Petitioner does not dispute receipt of this amount.

     The IRS relied on a Form 1099-INT, Interest Income, in

determining that petitioner had received $13 of interest income

on his checking account at the credit union.   The IRS relied on a

Form 1099-R, Distributions from Pensions, Annuities, Retirements

or Profit Sharing Plans, IRA’s, Insurance Contracts, in

determining that petitioner received a $412 gross distribution

from Farmers in 2002, $32 of which was taxable.

     After the case was set for trial, petitioner wrote to

counsel for respondent disputing the interest and Farmers income

determinations and requesting help in obtaining subpoenas for the

records of the credit union and Farmers.   The IRS obtained an

“Affidavit of Records Custodian of Fort Worth City Credit Union”.

The affidavit is not dated.   Attached to the affidavit is a

Form 1099-INT that reports $13.50 in interest income to

petitioner in 2002.   Also attached to the affidavit is a

Statement of Account that reports that petitioner’s savings

account with the credit union earned $0.51 of interest income in
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2002 and reflects $0.18 being deposited into the savings account

on December 31, 2002.    The Statement of Account also reports that

petitioner’s checking account earned $12.99 of interest income in

2002.    However, there is no evidence indicating whether that

amount was ever deposited in or credited to the checking account.

     The IRS attempted to obtain information from Farmers with

respect to the gross distribution that it reported for

petitioner.    As of the time of trial, the IRS had not obtained

any additional information from Farmers as to this amount.

                                Discussion

Unemployment Compensation

     Under section 61(a)(1), “gross income” means all income from

whatever source derived.    The general rule of section 85 is that,

“In the case of an individual, gross income includes unemployment

compensation.”    Sec. 85(a).    “Unemployment compensation” means

“any amount received under a law of the United States or of a

State which is in the nature of unemployment compensation.”      Sec.

85(b).

     Petitioner does not dispute that he received unemployment

compensation during 2002.    Petitioner argued at trial that he did

not report the unemployment compensation because an IRS worksheet

said that it was not taxable.      Petitioner’s posttrial

“clarification” memorandum argues that he did not report the

unemployment compensation because his “income from the Texas
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Workforce falls below the minimum income level for 2002 filing

* * * of $7,700.”

     Petitioner’s argument that he did not have enough income to

file a return in 2002 has no merit.    Without regard to the $4,466

of unemployment compensation, petitioner had $15,227.70 of IRA

distribution income, making it necessary to file a return in that

year.   He was obligated to report all of his income on that

return, including unemployment compensation received.

Accordingly, respondent’s determination as to this amount is

sustained.

Interest Income and Farmers Distribution

     Section 6201(d) provides that, if the taxpayer in a court

proceeding asserts a reasonable dispute with respect to the

income reported on an information return and fully cooperates

with the Commissioner, the Commissioner shall have the burden of

producing reasonable and probative information in addition to the

information return.

     Petitioner filed a Form 1040 in which he did not report the

$13 of interest income from the credit union.   Petitioner

testified that the average balance in his checking account was

around $142 and that the average balance in his savings account

was around $25.   Petitioner disputed that his checking account

could have earned $13 of interest income in 1 year.   The records

presented at trial showed returned draft fees that apparently
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were the cause of a dispute between petitioner and the credit

union.   Petitioner asserted that the interest income from the

credit union had been incorrectly reported to the IRS because the

credit union had a vendetta against him.

     Petitioner has asserted a reasonable dispute with respect to

the interest income, and the information produced by respondent

does not show any more than $0.18 being deposited into

petitioner’s savings account.    Therefore, respondent has not met

the burden imposed by section 6201(d).

     Respondent contends that the insurance distribution was the

result of a loan that petitioner took out from an annuity policy.

Petitioner denies that he had an annuity policy with Farmers.

Respondent produced no probative information about the nature of

the payment.   Therefore, respondent has not met the burden

imposed by section 6201(d).   These issues are decided in favor of

petitioner.

     To reflect the foregoing,


                                              Decision will be entered

                                         under Rule 155.
