TAX COURT OPINION

Case: Robert Drake Sansone & Sharon Lindquist Sansone
Docket Number: 24051-17S
Judge: Gale
Opinion Type: bench
Filed: 11/19/2018
Pages: 11

BD UNITED STATES TAX COURT WASHINGTON, DC 20217 ROBERT DRAKE SANSONE & SHARON LINDQUIST SANSONE, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ORDER ) ) ) ) ) ) ) ) Docket No. 24051-17S. 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 petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph H. Gale at Chicago, Illinois, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent. (Signed) Joseph H. Gale Judge Dated: Washington, D.C. November 19, 2018 SERVED Nov 26 2018 IN THE UNITED STATES TAX COURT In the Matter of: ROBERT DRAKE SANSONE & SHARON LINDQUIST SANSONE, Petitioner, v. ) ) ) ) Docket No. 24051-17S ) ) ) ) ) COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) Pages: 1 through 9 Place: Chicago, Illinois Date: October 29, 2018 (973)406-2250|operationseescribers.net j www.escribersnet IN THE UNITED STATES TAX COURT 1 In the Matter of: ROBERT DRAKE SANSONE & SHARON LINDQUIST SANSONE, Petitioner, v. ) ) ) ) Docket No. 24051-17S ) ) ) ) ) COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) Kluczynski Federal Building 230 S. Dearborn Street 39th Floor Room 3908, Illinois 60604 Chicago, October 29, 2018 The above-entitled matter came on for bench opinion, 1 2 3 4 5 6 8 9 10 11 12 13 14 15 pursuant to notice at 5:40 p.m. BEFORE: HONORABLE JOSEPH H. GALE Judge APPEARANCES: For the Petitioner: No Appearance For the Respondent: No Appearance 16 17 18 19 20 21 22 23 24 25 (9733406-2250]operationseescribers.net|www.escribers.net P R O C E E D I N G S 2 (5:40 p.m.) THE CLERK: Docket number 24051-17S, Robert Drake Sansone and Sharon Lindquist Sansone. (Whereupon, a bench opinion was rendered.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ) cribers (973)406-2250|operations@escribers.netlwwwascribers.net Bench Opinion by Judge Joseph H. Gale October 29, 2018 Robert Drake Sansone & Sharon Lindquist Sansone v. 3 Commissioner of Internal Revenue Docket No. 24051-17S THE COURT: THE 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 1 2 3 4 5 6 7 8 9 10 BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. 11 12 This case was heard as a Small Tax Case pursuant to the provisions of section 7463 of the Internal Revenue 13 Code in effect when the petition was filed. This bench 14 15 16 17 18 19 opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. Hereinafter in this bench opinion, all section references are to the Internal Revenue Code of 1986 in 20 effect for the taxable year in issue, and all Rule 21 references are to the Tax Court Rules of Practice and 22 Procedure. 23 24 25 Petitioners appeared on their own behalf. Megan E. Heinz appeared on behalf of respondent. Respondent determined a deficiency of $3,907 (973)406-2250|operations@escrbers.net|www.escribers.net with respect to petitioners' 2015 Federal income tax. Petitioners timely petitioned this court for redetermination. The issue for decision is whether petitioners are liable for tax ×ME the full amount of on petitioner-husband's Social Security dicability benefits before offset for workmen's compensation payments that reduced the actual amount of Social Security benefits 4 3- received. Some of the facts have been stipulated, and they are incorporated by this reference. Petitioners resided in Illinois when they filed the petition. Petitioners timely filed a joint Federal income 1 2 3 4 5 6 7 8 9 10 11 12 13 tax return for 2015. On their return, they reported 14 Social Security benefits received of $312 and treated $265 15 of that amount as taxable. They did not report any 16 workmen's compensation payments on the return. 17 A Form SSA-1099, Social Security Benefit 18 Statement, issued to petitioner-husband reports that his 19 Social Security benefits for 2015 were $30,958, of which 20 $30,646 was attributable to a workmen's compensation 21 offset. The difference between these two amounts is $312, 22 which is equal to the amount of Social Security benefits 23 petitioners reported on their return. Petitioners do not 24 dispute these amounts, which were reported to the Internal 25 Revenue Service by the Social Security Administration. (973)406-2250|operationseescribersnetivmwescribersaet 1 2 3 4 5 6 7 8 9 Respondent determined that petitioner-husband's Social Security benefits must include the amount of workmen's compensation payments he received in 2015. The deficiency at issue results from the corresponding increase in petitioners' adjusted gross income. Petitioners contend that the Social Security benefits reported on the Form SSA-1099 as a workmen's compensation offset should not be included as part of petitioner-husband's Social Security benefits because 10 workmen's compensation is a non-taxable insurance nt. 11 Petitioners argue that since petitioner-husband did not 12 13 14 receive Social Security benefits per se in excess of $312, and the workmen's compensation payor did not receive any reimbursement from the Social Security Administration, 15 they should not be treated as receiving Social Security 16 benefits in excess of $312. 17 18 Gross income includes all income from whatever source derived, unless specifically excluded by a 19 provision of the Internal Revenue Code. See sec. 61(a). 20 Generally, gross income does not include "amounts received 21 under workmen's compensation acts as compensation for 22 personal injuries or sickness." Sec. 104(a) (1). Social 23 Security benefits, however, are included in gross income 24 as provided by section 86. 25 Married taxpayers filing a joint return whose Cribers (973)406-2250|operationseescribers.riet|www.escribersnet 1 modified adjusted gross income plus one-half of their 6 2 3 4 5 6 7 8 9 Social Security benefits exceeds $44,000 must include up to a maximum of 85 percent of their Social Security benefits in their gross income. See sec. 86(a), (b), and (c). Respondent determined that 85 percent of the Social Security benefits petitioner-husband received for 2015 are includible in petitioners' gross income. Petitioners do not dispute that 85 percent of the Social 10 Security benefits petitioner-husband received are taxable, 11 12 nor do they dispute that he received workmen's compensation payments in the amount by which his Social 13 Security benefits were offset -- that is, $30,646. 14 Petitioners, however, argue that the Social Security 15 Administration never paid the benefits reported as 16 workmen's compensation offset, and thus that amount should 17 18 not be included in petitioners' gross income. Section 86(d)(3) clearly provides that such 19 offsets are Social Security benefits for purposes of 20 determining gross income. The statute provides in 21 relevant part: "if * * * any social security benefit is 22 reduced by reason of the receipt of a benefit under a 23 workmen's compensation act, the term 'social security 24 benefit' includes that portion of such benefit received 25 under the workmen's compensation act which equals such (973)406-2250|operations@escribers.net|www.escribersmet 1 2 3 4 5 6 7 8 9 10 11 12 13 14 reduction." Section 86 was added to the Internal Revenue Code by the Social Security Amendments Act of 1983, Pub. L. 98-21, sec. 121, 97 Stat. 80. The House report states in relevant part: Social security benefits potentially subject to tax will include any .workmen's compensation whose receipt caused a reduction in social security disability benefits. For example, if an individual were entitled to $10,000 of social security disability benefits but received only $6,000 because of the receipt of $4,000 of workmen's compensation benefits, then for purposes of the provisions taxing social security benefits, the individual will be considered to have received $10,000 of social security 15 benefits. A [H. Rept. 98-25, at 26 (1983), 1983 16 U.S.C.C.A.N. 219, 244.] 17 18 In other words, taxable Social Security benefits include the amount of workmen's compensation payments to 19 the extent that they reduce, or offset, the total Social 20 Security benefits to which the recipient is entitled, even 21 22 if the Social Security Administration did not pay out such amounts. See, e.g., Moore v. Commissioner, T.C. Memo. 23 2012-249; Mikalonis v. Commissioner, T.C. Memo. 2000-281; 24 Willis v. Commissioner, T.C. Memo. 1997-290. 25 Petitioners' argument is without merit. The 2 cribers (973) 406-2 250| operations@escribers.net j www.escribers.net language of section 86(d)(3) 8 is unambiguous. Neither the clear language of the statute nor the explanation in the legislative history suggest that a workmen's compensation payment needs to have been made by the Social Security Administration in order for it to be treated as a Social Security benefit for purposes of section 86. We therefore uphold respondent's determination that petitioner- husband's Social Security benefits for 2015 include the $30,646 offset corresponding to his workmen's compensation 1 2 3 4 5 6 7 8 9 10 payments. 11 12 13 Consequently, decision will be entered for respondent. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT 14 AND OPINION IN THIS CASE. 15 16 17 18 19 20 21 22 23 24 25 (Whereupon, at 5:49 p.m., the above-entitled matter was concluded.) (973)406-2250|operations@escribersnetjwww.escribersJiet 1 2 3 4 5 6 7 8 9 CERTIFICATE OF TRANSCRIBER AND PROOFREADER CASE NAME: Robert Drake Sansone & Sharon Lindquist Sansone v. Commissioner DOCKET NO.: 24051-17S 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 Eva Walsh on October 29, 2018 before the United States Tax Court at 10 its session in Chicago, IL, in accordance with the 11 applicable provisions of the current verbatim reporting 12 13 14 15 16 17 18 19 20 21 22 23 24 25 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 Transcriber 10/31/18 Date Jessica Hernandez Proofreader 10/31/18 Date 73)406-2250|operationseescribetsmet|www.escribersmet