                  T.C. Summary Opinion 2005-43



                     UNITED STATES TAX COURT



               SHAWN JEFFREY HINTZ, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 21553-03S.            Filed April 14, 2005.


     Shawn Jeffrey Hintz, pro se.

     Catherine S. Tyson, for respondent.



     GOLDBERG, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code 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,

subsequent 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.
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     Respondent determined a deficiency in petitioner’s Federal

income tax of $1,465 for the taxable year 2001.

     After concessions, the issue for decision is whether

petitioner is entitled to exclude from gross income $3,468

received as disability pension income from the Defense Finance

and Accounting Service because his pension income received is due

to a combat-related injury under section 104(b)(2)(C).

                             Background

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    Petitioner resided in San

Antonio, Texas, on the date the petition was filed in this case.

     From August 27, 1980, to March 26, 1984, petitioner served

in the United States Army.   While serving in the United States

Army, petitioner was assigned a primary specialty of 11B10,

infantryman.

     Petitioner enlisted with the United States Army at the age

of 18.   After enlisting, petitioner went to basic training for 4

months at Fort Benning, Georgia.    After basic training,

petitioner was transferred to Fort McNair in Washington, D.C.

While stationed at Fort McNair, petitioner was delegated to

presidential guard assignment.    This assignment included such
                                - 3 -

duties as presidential guard, battle reenactments,1 and

operation/field duty at different posts throughout the United

States.    Petitioner was never in actual combat.

     In February 1984, petitioner underwent a medical evaluation

at Walter Reed Army Medical Center.     As a result of this

evaluation, petitioner was diagnosed as having “bipolar disorder,

manic, with mood-congruent psychotic features”.     This diagnosis

resulted in petitioner’s being “relieved from assignment and duty

because of physical disability incurred while entitled to basic

pay and under conditions which permit * * * [his being placed] on

the Temporary Disability Retired List” as of March 12, 1984.

Petitioner’s effective date of retirement was March 26, 1984.      On

November 26, 1985, petitioner was removed from the Temporary

Disability Retired List (TDRL) and put on permanent retirement as

a result of permanent disability.

     After his discharge from the United States Army, petitioner

moved back to his parents’ home in Eureka, California.     For a

brief period, after his discharge, petitioner attended the

College of the Redwoods, taking a variety of courses, with a

special interest in sociology and psychology.     At the time of

trial, petitioner was a first-year apprentice with a pipefitters

union.    Sometime in 1984, petitioner was hospitalized in the

General Hospital at Eureka during a psychiatric visit, where it

     1
      We understand these reenactments to be combat simulations.
                               - 4 -

was discovered he had scarlet fever.     At this hospital, it was

determined that his psychiatric symptomology was due to delirium.

     During 2001, petitioner received disability pension income

of $3,468 from the Defense Finance and Accounting Service.

     By notice of deficiency, respondent determined that

petitioner’s disability pension income of $3,468 from the Defense

Finance and Accounting Service in tax year 2001 is not excludable

from gross income under section 104(b)(2)(C).

                            Discussion

     In general, the Commissioner’s determination set forth in a

notice of deficiency is presumed correct, and the taxpayer bears

the burden of showing that the determination is in error.      Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).       In certain

circumstances, however, if the taxpayer introduces credible

evidence with respect to any factual issue relevant to

ascertaining the proper tax liability, section 7491 places the

burden of proof on the Commissioner.     Sec. 7491(a)(1).   Credible

evidence is “‘the quality of evidence which, after critical

analysis, * * * [a] court would find sufficient * * * to base a

decision on the issue if no contrary evidence were submitted’”.

Higbee v. Commissioner, 116 T.C. 438, 442 (2001) (quoting H.

Conf. Rept. 105-599, at 240-241 (1998), 1998-3 C.B. 747, 994-

995).   Section 7491(a)(1) applies only if an individual taxpayer

complies with substantiation requirements, maintains all required
                                 - 5 -

records, and cooperates with reasonable requests by the

Commissioner for witnesses, information, documents, meetings, and

interviews.   Sec. 7491(a)(2).

     In this case, section 7491 is inapplicable because

petitioner did not introduce any credible evidence with respect

to the origination of his disability and failed to comply with

the substantiation, cooperation, and record-keeping requirements.

The burden of proof remains on petitioner to show that

respondent’s determination is in error.

Disability Pension Income

     As previously stated, the issue for decision is whether

under section 104(b)(2)(C) petitioner is entitled to exclude from

gross income $3,468 of pension income because he claims it was

received on account of a combat-related injury.   Respondent

argues that petitioner has not introduced credible evidence as to

the origination of his disability; thus the disability pension

income is not excluded from gross income under section

104(b)(2)(C).   On the record, we agree with respondent.

     As a general rule, the Internal Revenue Code imposes a tax

on the taxable income of every individual.   Sec. 1.   Section

61(a) specifies that, “Except as otherwise provided”, gross

income for purposes of calculating taxable income means “all

income from whatever source derived”.    The Supreme Court has long

reiterated the sweeping scope of section 61.    Commissioner v.
                              - 6 -

Schleier, 515 U.S. 323, 327 (1995); Commissioner v. Glenshaw

Glass Co., 348 U.S. 426, 429-431 (1955); Banaitis v.

Commissioner, 340 F.3d 1074, 1079 (9th Cir. 2003), affg. in part

and revg. in part on another ground T.C. Memo. 2002-5.   “Pensions

and retirement allowances paid either by the Government or by

private persons constitute gross income unless excluded by law.”

Sec. 1.61-11(a), Income Tax Regs.

     Section 104, in contrast, provides an exclusion with respect

to compensation for injuries or sickness.    Such exclusions from

gross income are construed narrowly.    Commissioner v. Schleier,

supra at 328; United States v. Burke, 504 U.S. 229, 248 (1992);

Banaitis v. Commissioner, supra at 1079.    Section 104(a) provides

in pertinent part:

     SEC. 104. COMPENSATION FOR INJURIES OR SICKNESS.

          (a) In General.--Except in the case of amounts
     attributable to (and not in excess of) deductions allowed
     under section 213 (relating to medical, etc., expenses) for
     any prior taxable year, gross income does not include–-

          *       *       *         *       *      *       *

               (4) amounts received as a pension, annuity, or
          similar allowance for personal injuries or sickness
          resulting from active service in the armed forces of
          any country or in the Coast and Geodetic Survey or the
          Public Health Service, or as a disability annuity
          payable under the provisions of section 808 of the
          Foreign Service Act of 1980; * * *
                               - 7 -

     Congress enacted section 104(b) to curb perceived abuses of

section 104(a)(4).2   Section 104(b)(1) provides that the

exclusion under section 104(a)(4) is restricted to the classes of

individuals described in section 104(b)(2), as follows:

          (2) Individuals to whom subsection (a)(4) continues to
     apply.--An individual is described in this paragraph if–-

               (A) on or before September 24, 1975, he was
          entitled to receive any amount described in subsection
          (a)(4),

               (B) on September 24, 1975, he was a member of any
          organization (or reserve component thereof) referred to
          in subsection (a)(4) or under a binding written
          commitment to become such a member,

               (C) he receives an amount described in subsection
          (a)(4) by reason of a combat-related injury, or

               (D) on application therefor, he would be entitled
          to receive disability compensation from the Veterans’
          Administration.

For purposes of section 104(b)(2)(C), the term “combat-related

injury” means personal injury or sickness that is:   (1) Incurred

as a direct result of armed conflict, while engaged in extra



     2
      The legislative history explains the reasons for the 1976
amendments as follows:

     In many cases, armed forces personnel have been classified
     as disabled for military service shortly before they would
     have become eligible for retirement principally to obtain
     the benefits of the special tax exclusion on the disability
     portion of their retirement pay. In most of these cases the
     individuals, having retired from the military, earn income
     from other employment while receiving tax-free “disability”
     payments from the military. * * * [H. Rept. 94-658, at 152
     (1975), 1976-3 C.B. (Vol. 2) 695, 844.]
                               - 8 -

hazardous service, or under conditions simulating war; or (2)

caused by an instrumentality of war.   Sec. 104(b)(3).3

     As previously stated, during 2001, petitioner received

disability pension income of $3,468 from the Defense Finance and

Accounting Service.   Petitioner claims that he is entitled to

exclude his disability pension income from gross income because

he served in a combat-related specialty.4

     To support his contention, petitioner provided copies of

Form DD214, Certificate of Release or Discharge From Active Duty,

Form DA 199, Physical Evaluation Board Proceedings, and a TDRL

Evaluation.

     Form DD214 summarizes petitioner’s military service.   It

shows that petitioner served in a primary specialty of 11B10,

infantryman, and that he was separated from duty on account of a

disability.   The decorations section of Form DD214 lists only


     3
      Sec. 104(b)(3) also provides that “In the case of an
individual who is not described in subparagraph (A) or (B) of
paragraph (2), except as provided in paragraph (4), the only
amounts taken into account under subsection (a)(4) shall be the
amounts which he receives by reason of a combat-related injury.”
     4
      In his petition, petitioner refers to combat-related
special compensation (CRSC). CRSC provides additional
compensation for certain retirees with qualifying disabilities
rated at 60 percent or higher or for retirees with disabilities
associated with the award of a Purple Heart decoration. CRSC was
not authorized until the passage of the Bob Stump National
Defense Authorization Act for Fiscal Year 2003, Pub. L. 107-314,
sec. 636, 116 Stat. 2574. Since the tax year at issue in the
present case, 2001, is prior to the authorization of such
compensation, petitioner’s reference to CRSC is erroneous.
                               - 9 -

normal basic training ribbons such as:   Good conduct medal,

expert badge W/M-16 rifle and hand grenades bars, army service

ribbon, and NCO professional development ribbon.   The decorations

section of Form DD214 lacks any combat-related decoration such as

a campaign ribbon.   The record of service section of Form DD214

shows that petitioner did not serve in any foreign country.

Moreover, petitioner admits he was never in actual combat.

     To further support his contention that the pension income at

issue in the present case is eligible for exclusion from gross

income under section 104(b)(2)(C), petitioner provided a copy of

Form DA 199, Physical Evaluation Board Proceedings.    However,

those sections of the form that relate to the origin of the

medical problem have been left blank.

     Moreover, in support of his contention, petitioner provided

a copy of a TDRL Evaluation, a medical evaluation which took

place on April 24, 1985, after petitioner had retired from active

duty.   The History of Original Illness section of the TDRL

Evaluation reads: “See original Medical Board Summary, dated

February, 1984.”   The Medical Board Summary has not been supplied

by petitioner and is not in the record of this case.

     The evidence petitioner presented and his own testimony show

only that he served in the United States Army as an infantryman

and that he was retired on account of his bipolar disorder.    The

evidence in the record does not show that his illness was
                               - 10 -

incurred as a direct result of any combat-related activity or

under conditions simulating war.   From the record, we conclude

that petitioner suffered from bipolar disorder which may have

resulted in part from the stress of routine military duty.      Such

a disorder without evidence of its direct result from combat-

related activity is not a combat-related injury as defined by

section 104(b)(3).    Therefore, respondent’s determination on this

issue is sustained.

                             Conclusion

     We have considered all of the other arguments made by the

parties, and, to the extent that we have not specifically

addressed them, we conclude they are without merit.

     Reviewed and adopted as the report of the Small Tax Case

Division.


                                     Decision will be entered

                                for respondent.
