                               T.C. Memo. 2019-41



                         UNITED STATES TAX COURT



    CHARLES W. MONROE AND REBECCA A. MONROE, Petitioners v.
       COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 7107-17.                         Filed April 24, 2019.



      E. Robert Clifton, for petitioners.

      Kimberly L. Clark and Catherine J. Caballero, for respondent.



                           MEMORANDUM OPINION


      RUWE, Judge: Respondent determined a deficiency in petitioners’ 2015

Federal income tax of $9,645 and an accuracy-related penalty under section
                                        -2-

[*2] 6662(a) of $1,875.1 After concessions by the parties,2 the only issue

remaining for decision is whether petitioners are eligible for the premium tax

credit (PTC) for 2015.

                                    Background

      The parties submitted this case fully stipulated pursuant to Rule 122.3 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.

      Petitioners are husband and wife, and they resided in California when they

filed their petition. They have a family size of two people for Federal income tax

purposes.

      In 2015 petitioner husband received $35,651.80 of Social Security benefits.

The payment was attributed to (1) $5,297 of 2015 Social Security benefits; (2) a


      1
      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.
      2
       The parties stipulated that for 2015 petitioners: (1) are allowed an
additional State and local tax deduction of $87; (2) are allowed an additional
withholding credit of $269; (3) failed to report wages of $5,207; (4) failed to
report unemployment benefits of $237; and (5) are liable for the section 6662(a)
penalty that is attributable to the unreported wages and unemployment benefits,
but they are not liable for the penalty attributable to any other items.
      3
       We issued an order on February 23, 2018, granting the parties’ joint motion
to submit this case without trial pursuant to Rule 122.
                                          -3-

[*3] $348 lump-sum payment related to 2014; (3) a $10,247 lump-sum payment

related to 2013; (4) a $10,943 lump-sum payment related to 2012; (5) a $2,607

lump-sum payment related to 2011; (6) $6,000 of attorney’s fees; and (7) $209.80

of Medicare Part B premiums deducted from petitioners’ benefits.

      From January 1 through August 31, 2015, petitioners were enrolled in a

health insurance plan through the California health insurance marketplace.

Petitioners received monthly advance payments of the PTC (APTC) of $1,059 to

cover a portion of the cost of the monthly health insurance premiums. Petitioners

received $8,472 of total APTCs in 2015.

      Petitioners timely filed a joint Federal income tax return for 2015 on which

they made a section 86(e) election. For 2015 they had adjusted gross income of

$38,497, consisting of $34,176 of wages, $237 of unemployment compensation,

and $4,084 of taxable Social Security benefits.4 Petitioners did not report any

excess APTCs, and they did not file a Form 8962, Premium Tax Credit (PTC).

      The Commissioner selected petitioners’ return for examination. He

determined that petitioners were ineligible for the PTC because their household

income for a family of two exceeded 400% of the amount equal to the Federal




      4
          The parties stipulated to these amounts.
                                           -4-

[*4] poverty line, and he issued petitioners a notice of deficiency.5 Petitioners

timely filed a petition with this Court.

                                      Discussion

      The Commissioner’s determinations in a notice of deficiency are generally

presumed correct, and the taxpayer bears the burden of proving that they are

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

do not contend, and the evidence does not establish, that the burden of proof shifts

to respondent under section 7491(a) as to any issue of fact.

      The issue we must decide is whether petitioners are eligible for the PTC,

which is generally available to taxpayers with a household income of at least

100% but not more than 400% of the amount equal to the Federal poverty line.

Sec. 36B(c)(1); sec. 1.36B-2(b)(1), Income Tax Regs. Household income is the

sum of the taxpayer’s modified adjusted gross income (MAGI) plus the MAGI of

family members: (1) for whom the taxpayer properly claims deductions for

personal exemptions and (2) who were required to file a Federal income tax return

under section 1. Sec. 36B(d)(2).




      5
       After issuing the notice of deficiency, the Commissioner issued petitioners
an updated report reducing the amount of taxable Social Security benefits on the
basis of petitioners’ sec. 86(e) election.
                                        -5-

[*5] This case turns on whether petitioners’ MAGI as defined by section

36B(d)(2)(B) exceeds 400% of the amount equal to the 2015 Federal poverty line.

The parties disagree as to how the section 86(e) election affects the section

36B(d)(2)(B) calculation of MAGI. Petitioners contend that MAGI does not

include Social Security benefits received during the taxable year that are

attributable to prior years by reason of a section 86(e) election. Respondent

contends that MAGI includes all Social Security benefits received during the

taxable year regardless of whether a taxpayer makes a section 86(e) election.

      The parties have stipulated that if petitioners’ contention is correct then

their MAGI will be less than 400% of the amount equal to the Federal poverty

line. If respondent’s contention is correct then petitioners’ MAGI will be

$70,065.80,6 and the parties have stipulated that $70,065.80 exceeds 400% of the

amount equal to the Federal poverty line.

      In Johnson v. Commissioner, 152 T.C.        ,    (slip op. at 12-13) (Mar. 11,

2019), we recently decided that MAGI as defined under section 36B includes all

Social Security benefits received during the taxable year, irrespective of a section

86(e) election. Thus, petitioners’ MAGI exceeds 400% of the amount equal to the


      6
      This consists of $35,652.80 of Social Security benefits, $34,176 of wages,
and $237 of unemployment compensation.
                                         -6-

[*6] Federal poverty line. We therefore sustain the Commissioner’s determination

that petitioners are ineligible for the PTC for 2015.

      In reaching our decision, we have considered all arguments made by the

parties, and to the extent not mentioned or addressed, they are irrelevant or

without merit.

      To reflect the foregoing,


                                               Decision will be entered under

                                       Rule 155.
