T .C. Su m m ary Op i n io n 2 01 7 -3 6

UNITED STATES TAX COURT

KENT E. KEETER, Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 8 4 0 3-1 5S. Fi l edM ay 3 0 , 2 0 1 7
.

J am es T. Kn i g ht , fo r p et i t i o n er. Edwi n B. Cl ev erd o n , fo r res p on d en t .

SUM M ARY OPINION PUGH, Ju d g e: Th i s cas e was h eardp u rs uan tt o th e p ro v i s i o n s o f s ect i o n 7 4 6 3 o f t h e In t ern al Rev en u e Co d e i n effect wh en th e p et i t i o n was fi l ed
. 1

1 Un l es s o th erwi s e i n d i cat ed , al l s ect i o n referen ces are t o th e In t ern al Rev enu e Co de i n effect fo r t h e y ear i n i s s u e, an d al l Ru l e referen ces are t o th e Tax (co n ti n u ed ...)-2
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Pu rs u an t t o s ect i o n 7 4 6 3(b ), th e d eci s i o n t o b e en t eredi s n o trev i ewab le b y an y
o th er co u rt , an dth i s o p i ni o n s h al l n o t b e t reat ed as p reced en tfo r an y o th er cas e. OnDecem

b er 2 9, 2 01 4 , res p o n d en td et erm i n eda d efi ci en cy o f $ 1 ,6 6 6 i n p et i t i o n er’ s Fed eral i n co m e t ax fo r 2 0 1 2 . Th e i s s ue fo r d eci s i o n i s wh et her p et i t i o n er’ s d i sab il i ty

ret i rem en ti n co m e i s t ax ab l e.

Back gro u n d So m e o f t h e fact s h av e b een s ti p u lat ed , an dth e s t i p u l at edfact s are i n co rp o rat edi n o u r fi n d in g s b y th i s referen ce. Pet i t i o n er res i d edi n M i ss i s s i p p i at th e t i m e h i s p et i ti on was fi l ed
. Pet i t i o ner b eg ans erv i ce wi th the U.S. Arm y o n J an u ary

1 9 , 1 98 4 . Up o n
en l i s tm en th e was s en tt o b o ot cam p . Wh il e i n trai n in g h e s us t ai n eda h eadi n jury th atreq u i reda t wo - t o th ree-m o n th h o sp i t al s t ay an d l edt o a s ei zu re d i s o rd er. Pet i t io n er was p l acedo n th e Tem p o raryDi sab i l i ty

Ret iredLi s t o n J u ne 7 , 1 9 8 4 , wi th a d i s ab i li ty

rat i n g o f 4 0%. Ap p ro x i m at el y o n e y ear l at er h e was reev al u at ed ata m i l i t ary

b as e an dp l aced o n p erm an en td i s ab i l i ty . He was p erm an en t l y ret i red ath i s th en -cu rren tg rad e o n J u l y 9 , 1 9 8 5 , wi th an h o no rab l e d i sch arg e. Ab o u tth at t i m e, p et i t i o n er m etwi th rep res en t at i v es o f t h e Dep art m en to f Vet eran s Affai rs

1 (...co n t in u ed ) Co u rtRu l es o f Pract i ce an dPro cedu re.-3
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(VA) as wel l. Pet i t i on er u n d ers t o o d t h en th ath e wo u l d qu al i fy fo r d i s ab i l i ty b en efi t s fro m

the VA b u td i d n o tap p l y . Aft er h i s d is ch arg e fro m

th e U.S. Arm

y p et i t i o n er res u m edth e co l l eg e edu cat i o n th at h e h adb eg u n b efo re en l i s t m en t , g radu at i n g wi th a d eg ree i n
co m p u t er s ci en ce. He h as wo rk edi n th atfi el dev er s i nce. In 2 0 1 2 p et i t i o n er recei v edd i s ab i l i ty ret irem en ti n co m e o f $ 5 ,9 3 6 fro m th e U.S. Arm y th ath e d i dn otrep ortas i n co m e. He h as fi l edp et i t i o ns fo r red et erm i n at i o n o n tw o p ri o r o ccas io n s ch al l en g i n g res p o n d en t ’ s i n cl us i o n o f h i s d i s ab i l i ty ret i rem en t i n co m e fo r p ri o r y ears . Th e Co u rten t ereds t i p u l at ed d eci s i o n s i n p et i t i o n er’ s fav o r i n b o th o f t h o s e cas es . 2 Di s cu ss i o n I. Bu rd en o f Pro o f Th e Co m m is s i o n er’ s d et erm i n at i o n s i n a n o t i ce o f d efi ci en cy are g en eral l y p res u m edco rrect , an dth e t ax p ay er h as the b u rd en o f p ro v in g th atth e d et erm i n at i o n s are i n erro r. Ru l e 1 4 2 (a); W el ch v . Hel v eri n g , 2 9 0 U.S. 1 1 1 , 1 1 5 (1 9 3 3). Un d er s ect i o n 7 4 9 1 (a), i n cert ai n ci rcu m s t an ces , th e b u rd eno f p ro o f m ay

2 Pet i t i o n er q u es t i o n s wh y res p o nd en t co n t i n u es t o ch al l en g e t h e s am e i s su e, b u twe d o n o treadp et i t io n er t o b e arg u i ng th at res p on d en ti s es t o p p edfro m ch al l en g i n g p et i t i o n er’ s t ax treat m en tm erel y b ecau s e res p o n d en tag reedth atth e Co u rten t er s t ip ul at edd eci s i o n s fo r t h o s e p ri or y ears . Iti s wel l s et t ledth ateach t ax y ear s t an d s o n i t s o wn . See Pek ar v . Co m m i s s io n er, 1 1 3 T.C. 1 58 , 1 6 6 (1 9 9 9 ).-4
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s h i ftfro m th e t ax p ay er t o th e Co m

m i s s i o n er. Pet i t io n er h as n o tcl ai m edo r s h o wn th ath e m eet s th e requ i rem en ts o f s ect i o n 7 4 9 1 (a) t o s h i ftthe b u rd en o f p ro o f t o
res p o n d en t as t o an y

rel ev an tfact u al i s s u e. II. Treat m en to f M i l it ary Di s ab i l i ty

Paym en t s Pen s i o n s an dret i rem en t i n co m e are i n cl u dedi n g ro s s i n co m e u nl es s
ex cl u d edb y

l aw. Sec. 6 1 (a)(1 1); s ec. 1 .6 1 -1 1 (a), In co m e Tax Reg s . M il i t ary ret i rem en tp ay fal l s u n d er t he d efi ni t i o n o f ret i rem en t i n co m e. Wh eel er v . Co m m i s s i o n er, 1 2 7 T.C. 2 0 0 , 2 0 5 n .1 1 (2 00 6 ), aff’ d , 5 2 1 F.3 d1 2 89 (1 0 th Ci r. 2 0 0 8 ). M i l i taryret i rem en t p aym en t s m ay b e ex cl u d ed fro m

g ro s s i n co m e, h o wev er, i f t h ey co n s t i tu t e am o u n t s recei v ed as a p en s i on , an nu i ty , o r s i m i lar al l o wan ce fo r p ers o n al i n

juri es o r s ickn es s res u l t i n g fro m act i v e s erv i ce i n th e arm edfo rces . Sec. 1 0 4(a)(4 ). Fo ur fu rth er l i m i t at i o ns are i m p o s edb y s ect i o n 1 0 4(b )(1 ), o n l y
o n e o f wh i ch i s ati s s u e h ere. In p art i cu l ar, u n d er s ect i o n 1 0 4 (b )(1 )(D), i f we d et erm i n e t h at“ on ap p l i cat i o n t h erefo r, * * * [p et it i on er] wo u l db e en t i t l edt o recei v e d i s ab i l it y

co m p en s at i o n fro m th e Vet eran s ’ Adm i n i s trat io n”, p et i t i o n er i s
en t i t l edt o ex cl u d e t h e m i li t ary d i s ab i l i ty

ret i rem en ti nco m e h e recei v edi n 2 0 1 2. Wh i l e t h e m il i taryan dth e VA ap p l y th e s am e rat i n g s t an d ard --t h e Vet eran s Affai rs Sch edu l e fo r Rat i n g Di s ab il i t i es (VASRD), wh i ch i s s etfo rt h at3 8 C.F.R.-5
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p t . 4 (2 0 12 )--each ap p ro ach es th e qu es t i o n o f d i s ab i li ty rat i n g s fro m

a d i fferen t p ers p ect i v e. See St i ne v . Un i t edSt at es , 9 2 Fed . Cl . 7 7 6 , 7 9 5 (2 0 1 0) (wh ereas th e
m i l i tary“ u s es th e VASRD t o d et erm i n e wh atco m p en s at i o n the s erv i ce m em b er i s du e fo r th e i nt erru p t i o n o f h i s m i l i tarycareer, * * * th e * * * [VA] i s m o re h o l i s t ical l y

ex am i n in g the i n d i vi du al ’ s ab il i ty t o en gag e i n ci v i l i an em

p l o ym en t ”). Th e p art i es d i s p ut e wh et h er p et i t i o n er wo ul d h av e qu al ifi ed u nd er t h e VA’ s ap p li cat io n o f t h e VASRD. Pet i t i o ner d i rect s u s t o h i s t es t i m o n y th ath e u n d ers to o daft er m eet i n g wi t h a VA rep res en t at i ve at th e t i m e o f h i s h o n orab l e d i s ch arg e t hath e wo u ldqu al i fy fo r b en efi t s . Res p o n d en t wo u l d h av e u s ex am i n e t h e VA s t an d ardan dap p l y i tt o p et i t i o n er wi th th e h i n d si g ht o f kn owi n g th at p et it i on er h ada career i n co m p u t ers aft er h e was h o n o rab l y

d i s ch arg ed . W e wi l l d ecl i n e res p on d en t ’ s i n v i t at i o n t o p ut
o u rs el v es i n th e s ho es o f t h e VA t o d ay an d i n s t ead b as e o u r h o l d i n g o n th e i n fo rm at i o n p et it i on er h adatth e t i m e wh i ch was th ath e wo u l dqu al i fy fo r VA-6
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b en efi t s . 3 W e t h erefo re h o l dth atp et i t io n er’ s m i l it ary d i s ab i li ty ret i rem en ti n co m e
o f $ 5 , 9 3 6 i s ex cl u d i b l e fro m h i s g ro s s i n co m e. Fi n al l y , i n h i s p o s t tri al b ri ef p et i t i o n er as k edfo r an awardo f reas o n ab l e l i ti g at i o n co s t s u n d er s ect io n 7 43 0 . Ru l es 2 3 0 t o 2 3 3 s eto utp ro cedu res fo r
m ak i n g a cl ai m

fo r reas o n ab l e l i t i g at i on co s t s u n d er s ect i o n 7 4 3 0. Un d er th o s e
ru l es , p et i t i o n er’ s cl ai m

i s p rem atu re. To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t eredfo r p et i t i o ner.

3 In an o th er T.C. Su m

m ary Op i n i o n , we d ecl i n edt o accep tt es t i m o n y fro m a t ax p ay er t h ath e was “ cert ai n ” t h ath e was en t i t l edt o VA b en efi ts , i n th e ab s en ce o f o b j ect iv e ev i d en ce reg ard in g h i s p h y s i cal co n d it i on . San a v . Co m m i s s i o n er, T.C. Su m m ary Op i n i on 2 01 5 -7 2 . As i d e fro m th e fact thata Su m m ary Op in i o n i s n o tp reced en t , s ec. 7 4 6 3 (b ), we fi n dth e fact s o f San a d i s ti ng u i s h ab le. Here p et i t i o n er d i dm eetwi th VA rep res en t at iv es an d cred i b ly t es t i fi edas t o h is u n d ers t an d i n g th ath e wo u l d qu al i fy . W e fi n d t h att es t i m o n y s u ffi ci en t t o es t ab l is h th atth e VA wo u l dh av e award edh i m d i s ab i li ty co m pen s at i o n atthe t im e o f h i s d i s ch arg e. Wh i le t h e p art i es d idn o t p ro du ce ev i d en ce o f t h e s peci fi c rat i n g s fo r s ei zu re d i s o rd ers , we b el i ev e t hats h o ul dn o t b ar p et it io n er fro m ex cl ud i n g an y o f h i s d i s ab i l i ty

p ay fro m g ro s s i n co m e.