1Unless otherwise indicated, section references hereafter

are to the Internal Revenue Code as amended.

T.C. Summary Opinion 2006-121

UNITED STATES TAX COURT

STEVEN ARNOLD DIEM, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 15994-04S. Filed July 31, 2006.

Steven Arnold Diem, pro se.

Catherine L. Campbell, for respondent.

COUVILLION, Special Trial Judge: This case was heard

pursuant to section 7463 in effect when the petition was filed.1

The decision to be entered is not reviewable by any other court,

and this opinion should not be cited as authority.

Respondent determined a deficiency of $1,472 in petitioner’s

Federal income tax for 1997, an addition to tax under section
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6651(a)(1) in the amount of $331.20, and an addition to tax under

section 6651(a)(2) in the amount of $368. At trial, respondent

conceded the section 6651(a)(2) addition to tax.

The issues for decision are: (1) Whether payments received

by petitioner during 1997 from the San Francisco, California

Employees’ Retirement System are excludable from gross income

under section 104(a)(1) and section 1.104-1(b), Income Tax Regs.,

as payments in the nature of workmen’s compensation, and (2)

whether petitioner is liable for the section 6651(a)(1) addition

to tax.

Some of the facts were stipulated. Those facts and the

accompanying exhibits are so found and are incorporated herein by

reference. Petitioner’s legal residence at the time the petition

was filed was Victoria, B.C., Canada.

Petitioner was employed as a fireman by the city of San

Francisco, California, for 18 years, from 1977 to 1995. Prior to

that, he was a fireman for the city of Oakland, California, for 6

years. During the year 1995, petitioner was determined to be

totally disabled by the San Francisco Fire Department. His

disability was determined to have been caused by stress, over a

sustained period of time, attributable to petitioner’s coworkers. 

It was determined that this condition rendered petitioner

incapable of performing his duties with the San Francisco Fire

Department.
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Petitioner initially applied for Industrial Disability

Retirement Benefits from the city of San Francisco. Petitioner

was approved for benefits under this program. The parties agree

that the benefits under this program were equivalent to workmen’s

compensation benefits, and, accordingly, such benefits would not

constitute gross income since petitioner’s disabling condition

was sustained within the scope of and in the course of his

employment. Sec. 104(a)(1). However, petitioner never received

any benefits under the Industrial Disability Retirement Benefits

program. Petitioner’s award had been made by the American

Arbitration Association. Before any benefits were paid to him,

the city of San Francisco, through its general counsel, refused

to honor the determination and threatened to challenge the award

in court. Petitioner was represented by counsel, and the two had

several conferences with officials of the city regarding the

matter. In that discourse, the representatives of the city of

San Francisco represented to petitioner and his attorney that, if

petitioner instead chose a “nonindustrial” disability retirement,

the city would not oppose such an award. Petitioner received an

assurance by the city, which was attested to by a representative

of the IRS who was present at one of the conferences, that the

benefits from a nonindustrial disability retirement program would

not constitute gross income. The benefits under the

nonindustrial disability program, however, were based on age and
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2Since this issue involves a question of law as to whether

the pension income is taxable, and there are no facts in dispute,

the Court decides the issue without regard to the burden of

proof. See sec. 7491(a). As to the sec. 6651(a)(1) addition to

tax, the burden of production is on respondent under sec.

7491(c). However, the burden of proof remains on petitioner to

persuade the Court the imposition of the addition to tax is

incorrect. Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001).

years of service. Because of the representation that the

nonindustrial disability benefits did not constitute gross

income, and considering further that the litigation that was

threatened by the city could be protracted and the outcome

uncertain, petitioner and his attorney agreed that petitioner

would accept the nonindustrial benefits. He began drawing the

nonindustrial benefits in 1997 and received $16,617 that year. 

On the Federal income tax return prepared by petitioner for 1997,

the $16,617 was reported as pension income, but, on line 21 of

Form 1040, U.S. Individual Income Tax Return, he listed a

negative income amount of $16,617, which he described on line 21

of the return as “nontaxable pension in lieu of workers comp.” 

In the notice of deficiency, respondent determined that the

$16,617 constituted gross income.2

In general, gross income includes “all income from whatever

source derived”. Sec. 61(a). However, section 104(a)(1)

excludes from gross income “amounts received under workmen’s

compensation acts as compensation for personal injuries or

sickness”.
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Section 1.104-1(b), Income Tax Regs., provides in pertinent

part:

Section 104(a)(1) excludes from gross income amounts which

are received by an employee under a workmen’s compensation

act * * * or under a statute in the nature of a workmen’s

compensation act which provides compensation to employees

for personal injuries or sickness incurred in the course of

employment. * * * However, section 104(a)(1) does not

apply to a retirement pension or annuity to the extent that

it is determined by reference to the employee’s age or

length of service, or the employee’s prior contributions,

even though the employee’s retirement is occasioned by an

occupational injury or sickness. * * * [Emphasis added.]

This and other courts have consistently held that, in order

to be excludable under the provisions of section 104(a)(1),

retirement benefits or payments may not be based upon any factor

other than disability, and, where benefits are based upon any

other factor, such as age or length of service on the job, the

retirement plan under which such benefits are paid will not

qualify as being similar to workmen’s compensation acts within

the meaning of section 104. Haar v. Commissioner, 78 T.C. 864

(1982), affd. 709 F.2d 1206 (8th Cir. 1983); Riley v. United

States, 140 Ct. Cl. 381, 156 F. Supp. 751 (1957); Mabry v.

Commissioner, T.C. Memo. 1985-328; Dauria v. Commissioner, T.C.

Memo. 1982-458; Carlton v. United States, 7 Cl. Ct. 323 (1985),

affd. 782 F.2d 173 (Fed. Cir. 1986).

There is no dispute that the benefits petitioner received

came from the nonindustrial disability retirement program, and
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the benefits under that program were based upon petitioner’s age

and length of service. Such benefits, therefore, do not qualify

under section 104(a)(1) and section 1.104-1(b), Income Tax Regs.,

quoted above. The benefits paid to petitioner, therefore, are

includable in gross income.

Petitioner contends, however, that the city of San

Francisco, through its representatives, as well as an agent of

the IRS, assured him and his attorney that the benefits under the

nonindustrial disability retirement system were in lieu of

workmen’s compensation benefits, and that the nonindustrial

disability benefits would not constitute gross income. The Court

concludes otherwise because the benefits were based upon age and

length of service and were not based upon personal injuries or

sickness. Whatever advice or representation that was made to

petitioner has no bearing upon the Court’s decision here. The

law is well settled that the Commissioner is not estopped and

cannot be bound by erroneous acts or omissions of his agents or

representations by other parties such as the employer. 

Authoritative tax law is contained in statutes, regulations, and

judicial decisions. Zimmerman v. Commissioner, 71 T.C. 367, 371

(1978), affd. without published opinion 614 F.2d 1294 (2d Cir.

1979); Green v. Commissioner, 59 T.C. 456, 458 (1972). A

taxpayer cannot prevail simply because he relied on incorrect

advice from his attorney regarding the tax consequences of the
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settlement. Coats v. Commissioner, T.C. Memo. 1977-407, affd.

without published opinion 626 F.2d 865 (9th Cir. 1980). The

representations that were made by the city of San Francisco and

an IRS agent do not carry the weight of law. Respondent,

therefore, is sustained on this issue as the benefits petitioner

received were based on age and years of service.

The remaining issue is respondent’s determination of the

addition to tax under section 6651(a)(1). At trial, respondent

offered into evidence certification that there was no record of

filing of an income tax return by petitioner for the year at

issue. Petitioner argued otherwise and submitted to the Court a

copy of the return he claimed he filed for 1997. The Court need

not address whether a return was in fact filed. The copy of the

return petitioner offered into evidence for 1997 bears a

signature date of July 29, 2004. Under section 6072(a), calendar

year taxpayers, such as petitioner, are required to file their

income tax returns by April 15 following the close of the taxable

year. For the year 1997, in the absence of any extensions, the

return for that year should have been filed on or before April

15, 1998. The return claimed to have been filed by petitioner

bears the signature date of July 29, 2004, several years after

the return was due to be filed. Respondent, therefore, is

sustained on this issue, since the 1997 return, if filed, was not

timely.
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Reviewed and adopted as the report of the Small Tax Case

Division.

 Decision will be entered for

 respondent for the deficiency and for

 the section 6651(a)(1) addition to tax

 and for petitioner for the section

 6651(a)(2) addition to tax.