                  T.C. Summary Opinion 2002-136



                     UNITED STATES TAX COURT



 ROBERT MATTHEW DONOHOE AND JANE HAREGEWOIN DONOHOE, Petitioners
         v. COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8075-01S.                Filed October 17, 2002.


     Robert Matthew Donohoe, pro se.

     Trent D. Usitalo, for respondent.



     POWELL, Special Trial Judge:   This case was heard pursuant

to the provisions of section 74631 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.


     1
        Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the year in issue,
and Rule references are to the Tax Court Rules of Practice and
Procedure.
                                 - 2 -

     Respondent determined a deficiency of $2,842 in petitioners’

1999 Federal income tax.    The issue is whether petitioners2 may

exclude from gross income payments received for unused vacation

and sick leave.     Petitioners resided in Penn Valley, California,

at the time the petition was filed.

     The facts are not in dispute, and the issue is primarily one

of law.3   Petitioner terminated his employment with the County of

Los Angeles in July 1999 for a new position as a pilot for

Skywest Airlines.    Because of the suddenness of his employment

change, petitioner was unable to use accrued vacation and sick

leave he had earned as an employee of the County of Los Angeles.

Thus, he received a $10,170 cash payment for the unused benefits.

     As reported on their 1999 Forms W-2, Wage and Tax Statement,

petitioners received $103,652 of taxable wages.    Petitioner

earned $51,688 and $6,733 from the County of Los Angeles and

Skywest Airlines, respectively, and petitioner Jane Haregewoin

Donohoe earned $45,231 from the State of California.




     2
        Petitioner Jane Haregewoin Donohoe did not appear at the
trial and did not execute the stipulation of facts. With respect
to her, we will dismiss this case for failure to prosecute. See
Rule 123(b). The decision, when entered, will be in the same
amount as ultimately determined against petitioner Robert Matthew
Donohoe. In the opinion, references to petitioner are to Robert
Matthew Donohoe.
     3
        Sec. 7491, concerning burden of proof, has no bearing on
this case.
                                 - 3 -

     In preparing their 1999 joint Federal income tax return,

petitioners reported $93,482 of taxable wages.    Petitioners

excluded $10,170, representing the amount petitioner received

from the County of Los Angeles for unused vacation and sick

leave.4

     Section 61 provides in part:

     SEC. 61.   GROSS INCOME DEFINED.

          (a) General Definition.–-Except as otherwise provided
     in this subtitle, gross income means all income from
     whatever source derived, including (but not limited to) the
     following items:

               (1) Compensation for services, including fees,
          commissions, fringe benefits, and similar items;

     Section 1.61-1(a), Income Tax Regs., further provides that

“Gross income means all income from whatever source derived,

unless excluded by law.”   Specifically, “Wages, [and] salaries

* * * are income to the recipients unless excluded by law.”     Sec.

1.61-2(a)(1), Income Tax Regs.    Gross income is an inclusive term

with broad scope, designed by Congress to “exert * * * ‘the full

measure of its taxing power.’”     Commissioner v. Glenshaw Glass

Co., 348 U.S. 426, 429 (1955) (quoting Helvering v. Clifford, 309

U.S. 331, 334 (1940)).   A taxpayer’s accession of wealth is gross


     4
        Respondent, in “Our Proposed Changes To Your 1999 Form
1040" issued to petitioners with the notice of deficiency,
asserted that $103,651 of taxable wages was reported to
respondent. As a result, respondent determined an increase of
$10,169 to petitioners’ gross income. Respondent does not
dispute the difference of $1 and does not intend to deviate from
the statutory notice of deficiency.
                                - 4 -

income, unless “some provision of the Code or of law [excepts],

[exempts], or [excludes] [it] from gross income.”    Williams v.

Commissioner, 35 T.C. 685, 687 (1961).    Furthermore, “exemptions

from taxation are not to be implied; they must be unambiguously

proved.”    United States v. Wells Fargo Bank, 485 U.S. 351, 354

(1988).    It is against this backdrop that petitioner begins his

Herculean journey to establish that the $10,170 received as

payment for his unused vacation and sick leave is nontaxable.

     Petitioner argues that section 457 applies to exclude his

compensation for unused vacation and sick leave from gross

income.5   Congress enacted section 457 by the Revenue Act of

1978, Pub. L. 95-600, sec. 131(c), 92 Stat. 2782.   Section 457(a)

provides that, if a taxpayer participates “in an eligible

deferred compensation plan, any amount of compensation deferred

* * * shall be includible in gross income only for the taxable

year in which such compensation or other income is paid or

otherwise made available” to the taxpayer.   An eligible deferred

compensation plan is a plan that meets the requirements of

section 457(b) and is “maintained by an eligible employer”.     Sec.



     5
        Petitioner bases his argument on a newspaper article he
read. Petitioner was unable to identify the source and
publication date of the article. We have repeatedly held that
the authoritative sources of Federal tax law are the statutes,
regulations, and judicial caselaw. Zimmerman v. Commissioner, 71
T.C. 367, 371 (1978), affd. without published opinion 614 F.2d
1294 (2d Cir. 1979); Green v. Commissioner, 59 T.C. 456, 458
(1972).
                                  - 5 -

457(b).    An eligible employer is “a State, political subdivision

of a State, and any agency or instrumentality of a State or

political subdivision of a State”.        Sec. 457(e)(1)(A).

     Initially we note that while it may be arguable that the

vacation and/or sick leave could be considered a deferred

compensation plan, section 457 would only defer the income to

“the taxable year in which such compensation or other income is

paid”.    Sec. 457(a).    Petitioner received the payment in 1999,

the year before the Court.

     But that is not the only problem with petitioner’s section

457 argument.    Section 457(e)(11) provides that “Any bona fide

vacation leave, sick leave, compensatory time, severance pay,

disability pay, or death benefit plan” is not a plan that

provides for the deferral of compensation.        Sec.

457(e)(11)(A)(i).6       Although the County of Los Angeles is an

eligible employer under section 457, the compensation petitioner

received for unused sick and vacation leave fits squarely within

the exemption of section 457(e)(11).        As a result, petitioner’s

compensation for unused vacation and sick leave is not a deferred

compensation plan, and section 457 cannot apply.         Therefore, we




     6
        Respondent issued Notice 88-8, 1988-1 C.B. 477, and
Notice 88-68, 1988-1 C.B. 556, which Congress later codified in
sec. 457(e)(11) by the Technical and Miscellaneous Revenue Act of
1988, Pub. L. 100-647, sec. 6064(a), 102 Stat. 3700.
                              - 6 -

hold that petitioner’s compensation for unused vacation and sick

leave is taxable wages under section 61.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                      Decision will be entered

                              for respondent.
