Docket No.: 15059-19 Page 1 of 1

DOUGLASS W. PEGUES,

Petitioner

v.

COMMISSIONER OF INTERNAL

REVENUE,

Respondent

Docket No. 15059-19

United States Tax Court

Washington, DC 20217

ORDER

 Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is

       ORDERED that the Clerk of the Court shall transmit herewith to petitioner

and to respondent a copy of the pages of the transcript of the trial in the above

captioned case before Judge Christian N. Weiler at Memphis, Tennessee on April 6,

2022, containing his oral findings of fact and opinion rendered at the trial session 

which the case was heard.

       In accordance with the oral findings of fact and opinion, decision will be enter

for respondent.

(Signed) Christian N. Weiler

Judge

Served 04/27/22
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Bench Opinion by Judge Christian N. Weiler 

April 6, 2022 

Douglass W. Pegues v. Commissioner 

Docket No. 15059-19

THE COURT: This Court has decided to render 

oral findings of fact and opinion in this case, and the 

following represents the Court's oral findings of fact and 

opinion. The oral findings of fact and opinion shall not 

be relied upon as precedent in any other case. 

This bench opinion is made pursuant to the 

authority granted by I.R.C. § 7459(b) of the Internal 

Revenue Code of 1986, as amended, and Rule 152 of the Tax 

Court Rules of Practice and Procedure. Unless otherwise 

indicated, all statutory references are to the Internal 

Revenue Code, Title 26 U.S.C., in effect at all relevant 

times, and all Rule references are to the Tax Court Rules 

of Practice and Procedure. 

Douglass W. Pegues, petitioner, resided in 

Alabama at the time his petition was filed; however, he 

resided in Tennessee at the time of trial and appeared at 

trial pro se. Rebecca R. Loveday appeared on behalf of 

the Commissioner of Internal Revenue, respondent. 

This case arises from a notice of deficiency 

dated May 13, 2019, issued to petitioner proposing an 

increase in tax (or tax deficiency) of $1,055 for the 2016 
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tax year. The notice of deficiency makes two adjustments 

to petitioner's tax return, namely (1) an increase in 

taxable retirement income by $20,000 and (2) additional 

taxable interest income by $23. 

Petitioner timely filed his petition with the 

Tax Court on August 14, 2019, disputing only the proposed 

adjustment to include additional taxable retirement 

income. In his petition, and at trial, petitioner did not 

dispute the adjustment to include taxable interest income. 

Therefore, the sole issue for decision by the Court is 

whether petitioner had unreported taxable retirement 

income for 2016.

Findings of Fact 

The parties did not file a stipulation of facts 

prior to trial. At trial respondent moved to enter six 

exhibits which were admitted by the Court without 

objection from petitioner. On July 2, 2021, respondent 

filed with the Court and served on petitioner, requests 

for admissions under Rule 90. Petitioner failed to file a 

response to respondent's requests for admissions, and 

therefore under Rule 90 these requests are deemed admitted 

and conclusively established. The facts of this case are 

not in dispute. 

Petitioner elected to receive a distribution 

from his employer retirement plan, State Street Retiree 
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Services/Boeing Voluntary Investment Plan (Boeing), in the 

amount of $45,000 in 2016. Utilizing a portion of the 

elected distribution, petitioner also made a qualifying 

partial rollover of $25,000. Boeing withheld federal and 

state taxes and made a net distribution to petitioner. 

Boeing issued petitioner a Form 1099 R which 

reflected a gross retirement distribution of $45,000 

during 2016. The Form 1099 R indicated that Boeing 

withheld $9,000 in federal taxes and $2,000 in state taxes 

from the gross distribution. 

Petitioner timely filed his 2016 federal income 

tax return, and on his return, he reported a taxable 

retirement distribution from Boeing of $9,000. 

On May 13, 2019, respondent issued petitioner a 

Notice of Deficiency for the 2016 tax year due to omitted 

retirement income and unreported interest. In his 

petition, petitioner agreed with the $23 interest income 

adjustment to his return. 

Opinion 

The Commissioner's determination of a taxpayer's 

liability in a notice of deficiency normally is presumed 

correct, and the taxpayer bears the burden of proving that 

the determination is incorrect. Rule 142(a); Welch v. 

Helvering, 290 U.S. 111, 115 (1933). 

Section 61(a) defines gross income as "all 
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income from whatever source derived." Pension 

distributions are includable in income specifically 

pursuant to section 61(a)(11). Generally, distributions 

from qualified retirement plans are includable in the 

taxpayer's income in the year of distribution. See I.R.C. 

§ 402(a). However, an exception exists if the taxpayer 

transfers any portion of the proceeds received to another 

eligible retirement plan or an individual retirement 

account (IRA) within 60 days of the distribution in 

other words makes a qualified "rollover." See I.R.C. §§ 

402(c), 408(d)(3). 

In the case of any designated distribution which 

is an eligible rollover distribution, the payor is 

required to withhold 20% of such distribution. See I.R.C. 

§ 3405(c)(1). Designated distributions include 

distributions from employer deferred compensation plans.

See I.R.C. § 3405(e)(1)(A)(i). An employer deferred 

compensation plan is defined broadly and includes any 

pension, annuity, stock bonus plan, or other plan that 

defers the receipt of compensation. See I.R.C. § 

3405(e)(5). 

Petitioner does not dispute that he elected to 

receive a gross distribution amount of $45,000 from his 

employer retirement plan. Petitioner instead avers that 

he made a qualified rollover of $25,000 of the 
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distribution amount into another qualified retirement plan 

or IRA at Cadence Bank during 2016, thus the rollover 

amount is not taxable. Petitioner further avers that the 

tax withholdings of $11,000 do not constitute taxable 

income and therefore his taxable retirement distribution 

was $9,000 the amount he reported on his tax return. At 

trial, petitioner also notes how respondent failed to 

adjust his tax return when it was originally filed, issued 

him the full amount of his refund claimed, and therefore 

contends respondent should be precluded from adjusting his 

return two years after it was filed. 

Respondent does not dispute that petitioner made 

a qualifying rollover of $25,000 during 2016 and does not 

treat the rollover as taxable in the May 13, 2019, Notice 

of Deficiency. Respondent argues that the proper amount 

of petitioner's taxable retirement income distribution is 

$20,000 which is the full amount of his gross 

distribution, $45,000, less petitioner's qualified 

rollover of $25,000. We agree with the argument made by 

respondent. 

Amounts withheld are in fact taxable income to 

the taxpayer for whom they are withheld. See Charczuk v. 

Commissioner, T.C. Memo. 1983-433, aff'd, 771 F.2d 471 

(10th Cir. 1985) (citing to Old Colony Trust Co. v. 

Commissioner, 279 U.S. 716 (1929)). We find petitioner's 
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argument that his withholdings are not taxable to be 

without merit and conclude that the proper amount of 

petitioner's taxable distribution from his employer 

retirement plan is $20,000. Accordingly, we sustain the 

adjustments made by respondent as found in the Notice of 

Deficiency issued to petitioner on May 13, 2019. 

We have considered all remaining arguments made 

by petitioner and to the extent they are not addressed 

herein, we find the arguments to be moot, irrelevant, or 

without merit.

Consistent with the preceding discussion, 

decision will be entered for respondent. This concludes 

the Court's oral findings of fact and opinion in this 

case. 

(Whereupon, at 10:29 a.m., the above-entitled 

matter was concluded.)
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CERTIFICATE OF TRANSCRIBER AND PROOFREADER 

CASE NAME: Douglass W. Pegues v. Commissioner 

DOCKET NO.: 15059-19

We, the undersigned, do hereby certify that the 

foregoing pages, numbers 1 through 9 inclusive, are the 

true, accurate and complete transcript prepared from the 

verbal recording made by electronic recording by Adrian 

Morris on April 6, 2022 before the United States Tax Court 

at its session in Memphis, TN, in accordance with the 

applicable provisions of the current verbatim reporting 

contract of the Court and have verified the accuracy of 

the transcript by comparing the typewritten transcript 

against the verbal recording. 

_______________________________________________ 

Meribeth Ashley, CET-507 4/20/22 

Transcriber Date 

_______________________________________________ 

Lori Rahtes, CDLT-108 4/20/22 

Proofreader Date