                   T.C. Summary Opinion 2005-24



                      UNITED STATES TAX COURT



          BONNIE J. AND ERNEST R. WERTS, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No.   5160-03S.                Filed March 1, 2005.


     Bonnie J. and Ernest R. Werts, pro se.

     Fred E. Green, Jr., for respondent.



     COUVILLION, Special Trial Judge:   This case was heard

pursuant to section 7463 in effect when the petition was filed.1

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, section references
hereafter are to the Internal Revenue Code in effect for the year
at issue. All Rule references are to the Tax Court Rules of
Practice and Procedure.
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     Respondent determined a deficiency of $705 in petitioners'

Federal income tax for the year 2000.

     The sole issue for decision is whether Social Security

benefits received by petitioners during 2000 are includable in

gross income under section 86(a).

     Some of the facts were stipulated.   Those facts and the

accompanying exhibits are so found and are incorporated herein by

reference.   Petitioners' legal residence at the time the petition

was filed was Carson City, Nevada.

     Petitioners each received Social Security retirement

benefits during the year 2000, which totaled $19,416.

Petitioners were also gainfully employed during 2000 and earned

combined wage and salary income of $31,649 that year.

     For the year 2000, petitioners filed a Federal income tax

return on Form 1040EZ, Income Tax Return for Single and Joint

Filers With No Dependents.   On that return, petitioners reported

the $31,649 wage and salary income they earned that year.

Petitioners, however, did not report as income any portion of the

$19,416 in Social Security benefits they received that year.2



     2
          The Form 1040EZ used by petitioners does not provide
for the reporting of other types of income, such as Social
Security benefits. That form contemplates only the reporting of
wage and salary income, taxable interest income, and unemployment
compensation. Petitioners did not use the proper form. They had
other sources of income; i.e., Social Security retirement
benefits.
                                - 3 -


     In the notice of deficiency, respondent determined that

$4,679 of the Social Security benefits received by petitioners

during 2000 represented gross income and determined a deficiency

in tax based upon the inclusion of that amount with the wage and

salary income petitioners reported.     No other adjustments were

proposed in the notice of deficiency.     At trial, the testimony of

petitioners indicated that they might be entitled to a dependency

exemption deduction for their son, who was disabled due to an

accident.   Rule 41(b)(1).   After the trial, respondent agreed

that petitioners would be allowed to produce evidence of the

support they provided for their son.     Thereafter, respondent

filed a report with the Court, conceding that petitioners were

entitled to a dependency exemption deduction for their son.

     With respect to the Social Security income at issue,

petitioners contend that they have never reported their

retirement benefits as income in prior years, nor have their

income tax returns ever been audited so as to require inclusion

of their benefits in income.    However, section 61(a) provides

that gross income includes all income from whatever source

derived, unless excludable by a specific provision of the Code.

Moreover, section 86(a), for the year at issue, provides that, if

the modified adjusted gross income of the taxpayer, plus one-half

of the Social Security benefits received, exceeds the adjusted

base amount, gross income includes the lesser of (1) the sum of
                               - 4 -


(a) 85 percent of such excess, plus (b) the lesser of (i) one-

half of the Social Security benefits received during the year, or

(ii) one-half of the difference between the adjusted base amount

and the base amount of the taxpayer, or (2) 85 percent of the

Social Security benefits received during the year.     Sec.

86(a)(2).   The base amount and the adjusted base amount for the

year at issue for a joint return are $32,000 and $44,000,

respectively.   Sec. 86(c)(1)(B) and (2)(B).    Petitioners do not

challenge respondent's computation under this formula that

results in $4,679 of their Social Security benefits' being

includable in gross income.   Petitioners contend only that

respondent never challenged their omission of such income on

prior years' returns.   The mere fact that omission of such income

on petitioners' prior returns was never questioned by respondent

is not a basis for the exclusion of such income on subsequent

returns that are questioned by respondent.     Each taxable year

stands alone, and respondent may challenge in a succeeding year

what was condoned or agreed to in a former year.     Boatner v.

Commissioner, T.C. Memo. 1997-379 (citing Auto. Club v.

Commissioner, 353 U.S. 180 (1957)), affd. 164 F.3d 629 (9th Cir.

1998).   Respondent, therefore, is sustained in including the

subject income on petitioners' 2000 return.     As noted above,

petitioners are entitled to a dependency exemption deduction for

their son for the year at issue based on respondent's concession.
                             - 5 -


    Reviewed and adopted as the report of the Small Tax Case

Division.



                                     Decision will be entered

                             under Rule 155.
