                  T.C. Summary Opinion 2001-158



                     UNITED STATES TAX COURT



                   MAJID NAEMI, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8339-00S.                Filed September 26, 2001.


     Majid Naemi, pro se.

     Michele A. Yates, for respondent.




     DEAN, 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.1    The decision to be




     1
      All 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,
unless otherwise indicated.
                               - 2 -

entered is not reviewable by any other court, and this opinion

should not be cited as authority.

     Respondent determined a deficiency of $657 in petitioner’s

1997 Federal income tax.   Respondent concedes that petitioner is

entitled to a refund of Social Security tax in an amount to be

determined based upon our resolution of the issue in this case.

The sole issue remaining for decision is whether petitioner is

entitled to a deduction for a $2,000 contribution to an

individual retirement account (IRA).

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

The stipulation of facts and the accompanying exhibits are

incorporated herein by reference.   Petitioner resided in Falls

Church, Virginia, at the time the petition in this case was

filed.

                             Background

     Petitioner was employed by CDI Corporation (CDI) in December

1997 for a period of 2 weeks which included two pay cycles.

During both pay periods petitioner contributed to an employer-

sponsored retirement plan.   Also during the year in issue,

petitioner made a $2,000 contribution to his IRA.   On Form 1040

of his Federal income tax return filed for 1997, petitioner

claimed a deduction of $2,000 for a contribution to an IRA.

     By notice of deficiency, respondent disallowed the entire

IRA deduction.   Respondent agrees that petitioner made a $2,000
                                   - 3 -

contribution to an IRA for the year in issue but argues that

petitioner is prohibited from deducting any of that amount during

the year in issue.    Specifically, respondent contends that

petitioner was an “active participant” in an employer sponsored

retirement plan as that term is defined in section 219(g)(5)(A).

     Petitioner maintains that he is entitled to deduct

contributions to his IRA because he was not eligible to

participate in CDI’s retirement plan.      Petitioner also maintains

that because his rights in the retirement plan had not vested

when his employment terminated, he should not be precluded from

deducting his $2,000 IRA contribution.

                             Discussion

     Section 219(a) generally allows a taxpayer to deduct the

amount contributed to an IRA.      The deduction in a taxable year,

however, may not exceed the lesser of $2,000 or an amount equal

to the compensation includable in the taxpayer’s gross income for

the year.    See sec. 219(b)(1).    The amount of the deduction may

be limited further for a taxpayer who is an “active participant”

in a qualified plan under section 401(a).     See sec. 219(g)(1),

(5)(A)(i).

     An individual is an active participant in a qualified plan

if, for any part of the year, he is eligible to participate in

the plan and makes voluntary or mandatory contributions to the

plan.   See sec. 219(g); secs. 1.219-1(c)(2), 1.219-2(b)(1), (e),
                               - 4 -

Income Tax Regs.   In the case of a single taxpayer, the deduction

is totally disallowed for 1997 if the taxpayer’s modified

adjusted gross income2 (modified AGI) exceeds $35,000 for the

taxable year.3   Petitioner reported modified AGI of $120,384.17

in 1997; thus he is not entitled to a deduction if he was an

active participant in a qualified retirement plan.

     Petitioner does not appear to raise the issue of whether the

CDI pension plan is of the type listed in section 219(g)(5).

Therefore, we find that petitioner has conceded that CDI’s

retirement plan is among those listed.

     Generally, a deficiency notice is presumed correct, and the

taxpayer has the burden of proving it wrong.     See Rule 142(a);

Welch v. Helvering, 290 U.S. 111, 115 (1933).4    Petitioner

testified that he was not eligible to participate in CDI’s plan.

The only other evidence in the record is CDI’s Form 1099-R,

Distributions From Pensions, Annuities, Retirement or Profit-

Sharing Plans, IRAs, Insurance Contracts, etc., indicating

petitioner’s participation in its retirement plan.     Respondent


     2
      Modified adjusted gross income, as relevant herein, is
adjusted gross income determined without regard to any deduction
for an IRA. See sec. 219(g)(3)(A).
     3
      A single taxpayer’s deduction for an IRA contribution in
1997 is limited using a ratio determined by dividing the excess
of the taxpayer’s modified adjusted gross income over $25,000, by
$10,000. See sec. 219(g)(2) and (3).
     4
      We do not find that the burden-shifting provisions of
current sec. 6201(d) or sec. 7491 apply.
                                 - 5 -

argues that the Form 1099-R provides sufficient evidence to

sustain a determination that petitioner was both eligible for and

an active participant in CDI’s retirement plan.       We agree.

Section 1.219-2(e), Income Tax Regs., does not address a

taxpayer’s eligibility to receive benefits under a qualified

retirement plan; rather it concludes that mere contribution

creates active participant status.       Petitioner has failed to

establish that participation in the plan was voluntary and that

he elected not to participate.    Based on the scant evidence in

the record, we find that petitioner was eligible and thus, was an

active participant within the meaning of section 219(g) during

the year in issue.

     Petitioner was accruing benefits, albeit unvested, under

CDI’s retirement plan during 1997.       Regardless of whether

petitioner’s rights vested and despite the fact that his

contributions were returned to him upon the termination of his

employment in 1997, petitioner was an active participant in a

qualified retirement plan in 1997.       Hildebrand v. Commissioner,

683 F.2d 57, 58 (3d Cir. 1982), affg. T.C. Memo. 1980-532; Eanes

v. Commissioner, 85 T.C. 168, 170-171 (1985).

     While the result to petitioner appears harsh, we cannot

ignore the flush language of the statute and, in effect, rewrite

the statute to achieve what seems to be a more equitable result.

See Eanes v. Commissioner, supra at 171.       “Whether and to what
                                 - 6 -

extent deductions shall be allowed depends upon legislative

grace; and only as there is clear provision therefor can any

particular deduction be allowed.”        New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934).

     Because petitioner was an active participant in CDI’s

qualified retirement plan during 1997 and his gross income for

the year exceeded $35,000, petitioner is not entitled to an IRA

contribution deduction for tax year 1997.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                         Decision will be entered

                                 under Rule 155.
