                  T.C. Summary Opinion 2006-181



                      UNITED STATES TAX COURT



                  JOE W. JACOBS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16339-05S.                Filed November 6, 2006.



     Joe W. Jacobs, pro se.

     Shannon Edelstone, for respondent.



     DEAN, Special Trial Judge:    This case was heard pursuant to

the provisions of section 7463.    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.   The decision to be entered is

not reviewable by any other court, and this opinion should not be

cited as authority.
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     Respondent determined for 2003 a deficiency in petitioner

and Ivy D. Jacobs’s (Mrs. Jacobs) Federal income tax of $878.

The sole issue for decision is whether Social Security benefits

received by petitioner and Mrs. Jacobs during 2003 are includable

in gross income under section 86(a).

                            Background

     The stipulation of facts and the exhibits received into

evidence are incorporated herein by reference.    At the time the

petition in this case was filed, petitioner resided in Oakland,

California.

     Petitioner and Mrs. Jacobs, now deceased, jointly filed for

2003, Form 1040, U.S. Individual Income Tax Return, reporting

Social Security benefits of zero and adjusted gross income of

$36,655.39.   Mrs. Jacobs died on June 3, 2004.

     On March 28, 2005, respondent issued to petitioner and Mrs.

Jacobs a notice known as a CP2000, or Revenue Agent Report (RAR).

The RAR notified petitioner and Mrs. Jacobs that they failed to

include in their gross income for 2003, Social Security benefits

of $2,556 and $9,908 received by petitioner and Mrs. Jacobs,

respectively, during that year.   Petitioner made a Social

Security repayment of $169 in 2003.    The RAR also indicated, as a

computational adjustment, that the proposed changes to their

gross income would reduce the amount of medical expenses allowed

as an itemized deduction on Schedule A.
                                 - 3 -
     On June 20, 2005, respondent issued to petitioner and Mrs.

Jacobs a statutory notice of deficiency for 2003.

                            Discussion

     The Commissioner’s determinations are presumed correct, and

generally taxpayers bear the burden of proving otherwise.     Rule

142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).1

     Petitioner argues that the Social Security benefits received

by Mrs. Jacobs in 2003 are excludable from gross income because

they were disability payments.    Even if Mrs. Jacobs had received

Social Security benefits by reason of a disability, the benefits

might be taxable under section 86(a).

     Prior to 1984, certain payments made in lieu of wages to an

employee who was retired by reason of permanent and total

disability were excludable from the employee’s gross income under

section 105(d).   However, the Social Security Amendments of 1983,

Pub. L. 98-21, sec. 122(b), 97 Stat. 87, repealed the limited

exclusion of disability payments provided by section 105(d),

effective with respect to taxable years beginning after 1983.

Since 1984, Social Security disability benefits have been treated

in the same manner as other Social Security benefits and are

subject to tax under section 86.     Reimels v. Commissioner, 123

T.C. 245, 247 (2004), affd. 436 F.3d 344 (2d Cir. 2006); Joseph




     1
      Since this case is decided by applying the law to the
undisputed facts, sec. 7491 is inapplicable.
                               - 4 -

v. Commissioner, T.C. Memo. 2003-19; Thomas v. Commissioner, T.C.

Memo. 2001-120.

      Section 61(a) provides that gross income includes all income

from whatever source derived, unless excludable by a specific

provision of the Code.   Section 86 requires the inclusion of a

portion of Social Security benefits in gross income if the

taxpayer’s adjusted gross income, with certain modifications not

relevant here, plus one-half of the Social Security benefits

received, exceeds a specified base amount.   Sec. 86(b).    For

taxpayers filing a joint return, the base amount is $32,000.

Sec. 86(c)(1)(B).

      Petitioner’s modified adjusted gross income was $36,655.39.

One-half of the total Social Security benefits received was

$6,147.50 (($12,464 - repayment of $169)/2).   The amount

determined under section 86(b)(1)(A), $42,802.89 ($36,655.39 +

$6,147.50), exceeds the base amount of $32,000.   Therefore, a

portion of petitioner’s Social Security benefits is taxable under

section 86(a).

      Section 86(a) provides that gross income includes the lesser

of:   (1) One-half of the Social Security benefits received during

the year, or (2) one-half of the excess described in section

86(b)(1).   The includable percentage is increased, however, if

the amount determined under section 86(b)(1)(A) exceeds the
                                 - 5 -

adjusted base amount of $44,000, in the case of a joint return.

See sec. 86(a)(2), (c)(2)(B).

     The increased percentage is not applicable because

petitioner did not exceed the threshold for the adjusted base

amount.   One-half of the excess described in section 86(b)(1) was

$5,401.45 (($42,802.89 - $32,000)/2), which is less than one-half

of the total Social Security benefits received.

     Accordingly, the Court sustains respondent’s determination

that $5,401 of the Social Security benefits received by

petitioner and Mrs. Jacobs in 2003 is includable in their gross

income for that year.

     To reflect the foregoing,



                                           Decision will be entered

                                      for respondent.
