                  T.C. Summary Opinion 2003-67



                     UNITED STATES TAX COURT



      WILLIAM IVAN DOTY AND SANDRA ANN DOTY, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 615-01S.              Filed June 5, 2003.


     William Ivan Doty, pro se.

     Frederic J. Fernandez, for respondent.



     PAJAK, 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.    Unless otherwise

indicated, 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 that petitioner had $8,786 in

additional pension and annuity income resulting in a deficiency

in the amount of $1,320 in petitioners’ 1998 Federal income tax.

This Court must decide whether petitioners must include in gross

income $8,786 in proceeds from the termination of life insurance

policies.

     Some of the facts in this case have been stipulated and are

so found.   Petitioners resided in Kingston, Wisconsin, at the

time they filed their petition.

     On October 8, 1998, petitioners sent a letter to

Northwestern Mutual Life Insurance Company (Northwestern) to

request the termination of six life insurance policies.    Only

five of the six surrendered policies are at issue and all

subsequent references are to the policies in issue.

     On October 15, 1998, Northwestern sent a letter to

petitioner which stated that the cancellation of each of the five

life insurance policies would result in taxable gain to

petitioners which Northwestern was required to report to the

Internal Revenue Service.   Northwestern’s letter also listed the

estimated taxable gain with respect to each of the five

surrendered life insurance policies.

     For the taxable year 1998, Northwestern issued to

petitioners two Forms 1099 which reported gross distributions

totaling $19,241 and taxable distributions totaling $8,786 with
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respect to the five surrendered life insurance policies.

     Petitioners did not report the distributions of $8,786 from

Northwestern on their 1998 Federal income tax return.    Respondent

determined that petitioners received gross income of $8,786 from

the surrender of the five life insurance policies.

     In general, the Commissioner’s determinations are presumed

correct, and the taxpayer bears the burden of proving otherwise.

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

Petitioners do not argue the applicability of section 7491(a),

and the record reflects that section 7491(a) does not apply.

     With exceptions not applicable in this case, in general any

amount which is received under a life insurance contract before

the annuity starting date, and which is not received as an

annuity is included in gross income to the extent it exceeds the

investment in the contract.   Sec. 72(e)(1)(A), (C).   This

includes any amount received under a contract on its complete

surrender.   Sec. 72(e)(5)(E)(ii).    The investment in the contract

is defined generally as the aggregate amount of premiums or other

consideration paid for the contract less amounts previously

received under the contract, to the extent they were excludable

from gross income.   Sec. 72(e)(6).

     Petitioners admit that the proceeds from the surrender of

the five life insurance policies are taxable.    Petitioners

contest the computation by Northwestern of the taxable gain from
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the distributions of the five surrendered life insurance

policies.

     On April 25, 2001, Northwestern sent petitioner a letter

which generally explained the calculation of the taxable portion

of petitioners’ surrendered life insurance policies.

Northwestern also provided petitioner a Surrender of Policy

Statement which detailed the policy value and the net proceeds

with respect to each surrendered life insurance policy.

     On June 29, 2001, Northwestern sent a letter to petitioner

which further explained the calculation of the taxable portion of

the surrendered life insurance policies.

     On October 2, 2002, in a sworn affidavit, Linda A. Schaefer

(Ms. Schaefer), Northwestern’s Director of the Policyowners

Department, set forth the total policy cash value, the net cost,

and the net taxable gain with respect to each of petitioners’

five surrendered life insurance policies.   Ms. Schaefer’s

statement also explained in detail how each of these amounts was

computed.   In a second sworn affidavit bearing the same date, Ms.

Schaefer provided a detailed history of the premiums paid and the

loans made with respect to petitioners’ surrendered life

insurance policies.

     Petitioner testified that he received annual statements from

Northwestern with respect to the surrendered life insurance

policies which detailed premium and loan payments.   Petitioner
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stated that he had never questioned any of the information

provided by the statements prior to his cancellation of the

policies.   At trial, petitioner presented no evidence other than

undocumented and uncorroborated assertions to establish that

petitioners had a greater investment in the five surrendered life

insurance policies than the amounts computed by Northwestern.

Petitioner failed to show that Northwestern’s records were not

correct and that respondent’s determination was not correct.

Accordingly, respondent’s determination that petitioners must

include $8,786 in gross income with respect to the five

surrendered life insurance policies is sustained.

     Reviewed and adopted as the report of the Small Tax Case

Division.



                                            Decision will be entered

                                       for respondent.
