T.C. Summary Opinion 2011-9

UNITED STATES TAX COURT

ROBERT AND MILLICENT M. LOWERY, Petitioners v. 

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 27978-08S. Filed February 3, 2011.

Robert and Millicent M. Lowery, pro se.

Randall B. Childs, for respondent.

MORRISON, 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. Pursuant to section 7463(b),

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

and this opinion shall not be treated as precedent for any other

case. Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue. 
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The respondent determined a deficiency of $2,047 in the

petitioners’ federal income tax for the taxable year 2006. The

issue for decision is whether a portion of the Social Security

benefits the petitioners received in 2006 is includable in their

gross income.1 

Background

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

found. The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time they filed

their petition, the petitioners resided in Georgia. 

During the year in issue, the petitioners received Social

Security benefits totaling $15,945. The petitioners filed a Form

1040A, U.S. Individual Income Tax Return, for the 2006 taxable

year. They elected to file jointly and reported adjusted gross

income of $59,007.50. This amount did not, however, include any

of the $15,945 of Social Security benefits that the petitioners

received during the 2006 taxable year.

The respondent contends that a portion of the Social

Security benefits the petitioners received in 2006 is includable

as gross income under section 86. The petitioners contend

otherwise, claiming that taxing Social Security benefits amounts

to double taxation.

1The petitioners conceded at trial that $95 received from

Manhattan Life Insurance Co. should be included in their income.
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Discussion

The amount of Social Security benefits to be included in

gross income is determined by a statutory formula found in

section 86. See sec. 86(a)-(d). Section 86 requires inclusion

of a portion of the payments if the sum of the taxpayer’s

adjusted gross income (with certain modifications not relevant

here) and one-half of the Social Security benefits received

exceeds a specified “base amount”. Jelle v. Commissioner, 116

T.C. 63, 71 (2001). This base amount is $32,000 for taxpayers

like the petitioners who are married and filed a joint return. 

See sec. 86(c)(1)(B). Since the petitioners reported adjusted

gross income of $59,007.50 and received Social Security benefits

totaling $15,945 during the 2006 taxable year, the base amount

threshold has been exceeded. We therefore sustain the

respondent’s determination that a portion of the $15,945 the

petitioners received in 2006 as Social Security benefits must be

included in the petitioners’ gross income for that taxable year.

The petitioners argue that the amounts that they contributed

to the Social Security system have already been taxed and that

they should not be taxed again as they receive benefits from

Social Security. This argument is unavailing for reasons we

explained in Roberts v. Commissioner, T.C. Memo. 1998-172, affd.

without published opinion 182 F.3d 927 (9th Cir. 1999). One can

imagine a system of taxing Social Security benefits whereby the
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benefits are free of tax until they exceed the total FICA taxes

paid by the recipient. Such a system was not enacted by

Congress. Instead Congress enacted section 86, which, in

recognition that Social Security benefits are partly financed by

employees, does not require every dollar of Social Security

benefits to be included in the income of the recipient. It

requires only a fraction of the benefits to be included. This

fraction is 85 percent for the petitioners, as the IRS correctly

calculates. 

To reflect the foregoing, 

Decision will be entered

for respondent.