TAX COURT OPINION

Case: Mark Timothy & Catherine Louise Zitzer
Docket Number: 28737-08
Judge: Colvin
Opinion Type: bench
Filed: 05/05/2010
Pages: 8

UNITED STATES TAX COURT . WASHINGTON, D.C. 20217 MARK TIMOTHY & CATHERINE LOUISE ZITZER, Petitioners, v . Docket No . 28737-08 COMMISSIONER OF INTERNAL REVENUE , Respondent . O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court shall transmit to petitioners . and to respondent a copy of the pages of the transcript of the proceedings of the above case before Judge Diane L . Kroupa at San Francisco, California, on April 20, 2010, containing her oral findings of fact and opinion . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed ) Diane L. Kroupa Judge Date : Washington, D .C . May 5, 2010 SERVED MY ° 7 20W 1 Bench Opinion by Judge Diane L . Kroupa April 20, 2010 2 Mark Timothy & Catherine Louise Zitzer Docket No . 28737-0 8 3 3 4 THE COURT : The Court has decided to render ora l 5 findings of fact and opinion in this case, and the .following 6 represents the Court's oral findings of fact and opinion . 7 The oral findings of fact and opinion shall not be relied upon as precedent in any other case . This benc h 9 opinion is made pursuant to the authority granted by section 10 7459(b) and Rule 152 . All section references are to the 11 Internal Revenue Code for 2006, referred to in this benc h 12 opinion as the year at issue, and all rule references are to 13 the Tax Court Rules of Practice & Procedure . 14 Petitioner Catherine Zitzer appeared prose, and 15 Christina Ciu appeared on behalf of Respondent . 16 FINDINGS OF FACT 17 Some of the facts have been stipulated and they 18 are so found . Petitioners resided in San Jose, California, 19 at the time they filed the petition . The facts are not in 20 dispute . 21 Ms . Zitzer worked for the Santa Clara Valley 22 Medical Center, and on May 27th, 2002, a dead body fell on 23 her and broke her neck . The injury was deemed a temporary 24 total disability from May 2002 through November 2003 . She 25 received workers' compensation benefits from May 2002 t o Heritage Reporting Corporation (202) 628-4888 4 1 October 2005 . She applied for social security disabilit y 2 benefits in September 2004, was initially rejected, then in 3 2006 she received an award letter from Social Security . 4 The letter informed Ms . Zitzer that she qualified 5 for disability and that $4774 .40 was the benefit paymen t 6 offset . Approximately half, $2403 .20, was treated as paid 7 in 2006 for 2004 and the remaining half, or $2371 .20, was 8 treated as paid in 2006 for 2003 . Only $24 of the offset 9 amount was actually paid in 2006 . 10 Ms . Zitzer received a form SSA-1099, socia l 11 security benefit statement, for 2006, reflecting $4774 .4 0 12 was the benefits paid in 2006 . This amount included the $24 13 Ms . Zitzer received by check of social security benefits , 14 plus $4742 .40 as the workers' compensation offset, referred 15 to in this bench opinion as the workers' compensation offset 16 amount . 17 This amount was reported as 'benefits paid i n 18 2006' and as 'net benefits for 2006' . Petitioners reported 19 only the $24 cash social security benefits received in 2006 20 and did not report the workers' compensation offset amount, 21 $4742 .40, even though the SSA-1099 reported this amount as 22 benefits paid in 2006, and as net benefits for 2006 . 23 Respondent determined that Petitioner should have 24 included the $4742 .40 workers' compensation offset amount of 25 social security income in 2006, not just the cash socia l Heritage Reporting Corporation (202) 628-4888 5 1 security benefits of $24 . In the deficiency notice dated 2 September 2nd, 2008, Respondent increased the total socia l 3 security benefits to $4774 .40, thereby increasing the amount 4 included in Petitioners' gross income in 2006 which resulted 5 in a $388 deficiency . 6 Petitioners do not dispute that the Socia l 7 Security Administration in fact offset part of Ms . Zitzer's 8 social security benefits she received in 2002 and 2003 . 9 Petitioners argue that the workers' compensation offset d-tic 10 amount should be taxable only in the years 2002 and 200 3 11 because it reduced the amount of workers' compensation she 12 otherwise would have been entitled to receive, in 13 those years . She only received $24 of income in 2006 and at 14 that time she was not receiving workers' compensation . 15 OPINION 16 Petitioners have conceded all issues other than 17 the workers' compensation offset amount . We are asked to 18 decide whether certain workers' compensation benefit s 19 Ms . Zitzer is treated as having received in 2006 are taxable 20 in 2006, even though she did not receive an actual payment 21 from the Social Security Administration of the workers ' 22 compensation offset amount during 2006 . 23 Respondent maintains that although Petitioners did 24 not receive an actual payment from the Social Securit y 25 Administration of this amount during 2006, they must Heritage Reporting Corporation (202) 628-4888 1 nevertheless include the offset amount in their income for 6 2 2006 under section 86(d)(3) . 3 We agree . 4 We begin with certain fundamental principles of 5 tax litigation . Gross income includes all income fro m 6 whatever source derived unless specifically excluded . Sec . 7 61(a) . 8 Workers' compensation is generally excludable from 9 a taxpayer's gross income . Sec . 104(a)(1) . 10 In contrast, social security benefits, including 11 social security disability benefits, may be includable in a 12 taxpayer's gross income, pursuant to a statutory formul a 13 that takes into account a number of factors, including the 14 amount of social security benefits received, the taxpayer's 15 other income, and the taxpayer's filing status . Sec . 86 ; 16 17 Thomas v . Commissioner , T .C . Memo 2001-120 ; Maki v . Commissioner , T .C . Memo 1996-209 . 18 If the amount of social security benefits a 19 taxpayer receives is reduced because the taxpayer received 20 workers' compensation benefits, then the amount of the 21 workers' compensation benefits that caused the reduction, 22 the so-called offset amount, is treated as though it were a 23 social security benefit . Sec . 86(d)(3) . See Mikalonis v . 24 Commissioner , T .C . Memo 2000-281 ; Willis v . Commissioner , 25 T .C . Memo 1997-290 . Heritage Reporting Corporation (202) 628-4888 7 1 The effect of section 86(d)(3 ) is to make part of 2 Petitioner ' s workers ' comp benefits otherwise excludabl e 3 under section 104(a)(1) subject to tax . 4 The Social Security Administration informed 5 Ms . Zitzer of the amount by which her social securit y 6 benefits were reduced because she received workers' comp 7 benefits . That amount was $4774 .40 . Thus, the statut e 8 requires us to treat the amount of the actual reduction as 9 social security benefits for purposes of computing th e 10 portion of those benefits that are taxable to them . 11 Section 86 was added to the code by the Social 12 Security Amendments of 1983, Publ . L . 98-21, sec . 121, 97 13 Stat . 80 . 14 The House report accompanying section 86 states 15 that social security benefits potentially subject to tax 16 include any workmen ' s compensation whose receipt caused a 17 reduction in social security disability benefits . Fo r 18 example , if an individual was entitled to $10,000 of socia l 19 security disability benefits but received only 'V6,000 from the dpjL 20 SSA because he or she received14,000 of workmen 's v ~ .. 21 compensation benefits , then the individual is considered to 22 have received $ 10,000 of social security benefits fo r 23 purposes of determining the amount of taxable social 24 security benefits . See H . Rept . 98-25 at 26 , ( 1983) . 25 The purpose of section 86(d)(3) is to equalize the Heritage Reporting Corporation (202) 628-4888 8 1 federal tax treatment of social security benefits that ar e 2 received by various taxpayers who .may or may not be eligible 3 to receive workers' compensation benefits . H . Rept . 98-2 5 4 at 26 (1983) . 5 The offset amount is included in income in the 6 same manner as a social security benefit . Sec . 86(d)(3) . 7 Petitioners want the offset amount to be included 8 in income only in the years 2002 and 2003 because it reduced 9 the amount of workers' compensation she otherwise would have 10 been entitled to receive during those years . She onl y 11 received $24 of actual income in 2006 . They therefore argue 12 that section 86(d)(3) is unjust because they did not receive 13 the offset amount in 2006 . 14 While we may sympathize with Petitioners, thi s 15 Court is not the appropriate forum to raise fairness issues . 16 Our job is to apply the law as written . Metzger Trust v . 17 Commissioner , 76 T .C . 42, 59-60 (1981) ; affd . 693 F .2d 459 18 (5th Cir . 1982) . 19 It is up to Congress to address questions of 20 fairness and to make improvements to the law . Id . 21 Based on the foregoing, we hold for Respondent and 22 sustain Respondent's determination that Petitioners should 23 have included the workers' compensation offset amount i n 24 gross income for 2006 . Petitioners are therefore liable for 25 the $388 deficiency . Heritage Reporting Corporation (202) 628-4888 9 1 To give effect to the foregoing, decision will be 2 entered for Respondent . 3 This concludes the Court ' s oral findings of fact 4 and opinion in this case . 5 (Whereupon , at 11 :22 a .m ., the bench opinion in 6 the above - entitled matter was concluded . ) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2 4 25 Heritage Reporting Corporation (202) 628-4888