T.C. Summary Opinion 2011-71

UNITED STATES TAX COURT

JOSEPH B. AND ROSEMARY A. NIESEN, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 6083-10S. Filed June 16, 2011.

Joseph B. and Rosemary A. Niesen, pro sese.

Kristin M. Timmons, for respondent.

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

the provisions of section 7463 of the Internal Revenue Code in

effect when the petition was filed.1 Pursuant to section

7463(b), the decision to be entered is not reviewable by any

1 Unless otherwise indicated, all subsequent section

references are to the Internal Revenue Code in effect for the

year in issue.
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other court, and this opinion shall not be treated as precedent

for any other case.

Respondent determined a deficiency in petitioners’ 2007

Federal income tax of $1,492.

The issue for decision is whether petitioners are entitled

to a deduction for a contribution to an individual retirement

account (IRA). We hold that they are not.

Background

Some of the facts have been stipulated, and they are so

found. We incorporate by reference the parties’ stipulation of

facts and accompanying exhibits.

Petitioners resided in the State of Minnesota when the

petition was filed.

Petitioners timely filed a joint Federal income tax return

for 2007. On their return petitioners reported in income: 

Taxable interest, ordinary dividends, taxable refunds, a capital

loss, taxable pension and annuity income, a farming loss, and

taxable Social Security benefits. Petitioners claimed a $5,000

deduction for an IRA contribution made by petitioner Rosemary A.

Niesen.
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In a notice of deficiency respondent determined, inter alia,

that petitioners were not entitled to the claimed IRA

contribution deduction of $5,000 for 2007.2

Discussion3

Generally, a taxpayer is entitled to deduct an amount

contributed to an IRA. Sec. 219(a). The deduction, however,

shall not exceed the lesser of the deductible amount or an amount

equal to the taxpayer’s compensation includable in gross income. 

Sec. 219(b)(1), (5). Compensation includes earned income, which

is defined as “the net earnings from self-employment (as defined

in section 1402(a))”. Secs. 401(c)(2), 219(f)(1). Section

1402(a) defines net earnings from self-employment as “the gross

income derived by an individual from a trade or business carried

on by such individual, less deductions allowed by this subtitle

which are attributable to such trade or business”. Compensation

excludes any amounts received as interest and dividends, a

pension or annuity, and Social Security benefits. Secs.

219(f)(1), 401(c)(2), 86(f)(3); see Miller v. Commissioner, 77

T.C. 97, 102 (1981).

2 The other adjustments in the notice of deficiency are

computational as a result of the disallowance of the $5,000 IRA

contribution deduction and, therefore, are not at issue in this

case.

3 We decide this case without regard to the burden of

proof.
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Petitioners’ income for 2007 consisted of interest income,

ordinary dividends, taxable refunds, pension and annuity income,

and Social Security benefits, none of which is compensation as

defined in the Internal Revenue Code. See sec. 219(f)(1); sec.

1.219-1(c)(1), Income Tax Regs. Moreover, petitioners reported a

net loss from their farming activity. Thus, there were no net

earnings from self-employment, no earned income, and, therefore,

no compensation.

Petitioners contend that respondent determined the same

issue in petitioners’ favor as to 2006, thereby establishing

precedent. However, each taxable year stands alone, and the

Commissioner may challenge in a succeeding year what was condoned

or agreed to in a previous year. Auto. Club of Mich. v.

Commissioner, 353 U.S. 180 (1957); Rose v. Commissioner, 55 T.C.

28 (1970). Thus, respondent’s concession of or failure to

challenge the IRA deduction in a prior year does not necessarily

entitle petitioners to the deduction in subsequent years.

There is no question that petitioners had various items of

income properly reportable on their income tax return. 

Unfortunately, neither petitioner received any compensation, as

Congress defined this term for IRA purposes, during 2007. 

Accordingly, we hold that petitioners are not entitled to the

claimed IRA contribution deduction.
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Conclusion

We have considered all of the arguments made by the

petitioners, and, to the extent that we have not specifically

addressed those arguments, we conclude that they do not support a

result contrary to that reached herein.

To reflect the foregoing,

Decision will be entered

for respondent.