TAX COURT OPINION

Case: Paul Beckley & Teresa Staub Tsark
Docket Number: 24099-10S
Judge: Goeke
Opinion Type: bench
Filed: 06/27/2011
Pages: 6

UNITED STATES TAX COURT WA SHINGTON, DC 20217 PAUL BECKLEY AND TERESA STAUB TSARK, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) O R D E R Docket No. 24099-10S. 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 Robert Goeke at Tampa, Florida, on June 10, 2011, containing his oral findings of fact and opinion rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, decison will be entered for respondent. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. June 27, 2011 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 3 BENCH OPINION BY JUDGE ROBERT JOSEPH GOEKE, PAUL BECKLEY and TERESA STAUB TSARK v. COMMISSIONER DOCKET NO.: 24099-10S DATE: June 10, 2010 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 be relied upon as precedent in any other case. 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. Section references after this are to the Internal Revenue Code in effect for the year 2008, which is the year at issue in the case, and Rule references are to the Tax Court Rules of Practice and Procedure. This case is before the Court based upon the Court's deficiency jurisdiction. Respondent issued a Notice of Deficiency determining that Petitioners were liable for a deficiency in the amount of $4,550 for Heritage Reporting Corporation (202) 628-4888 1 | 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 4 2008, and Petitioners filed a timely petition to bring the case before this Court. The only issue in dispute is whether $18,240 of disability income, which Petitioner received from Metropolitan Life Insurance Company, or MetLife, is taxable to the Petitioners in 2008. Petitioners filed a Joint Federal Income Tax Return, but the amount in question was paid to Mr. Tsark. The dispute centers on Section 104 of the Internal Revenue Code. Section 104 provides exceptions to the general rule of Section 61 for certain payments received on account of injury or sickness. Petitioner maintains that these exceptions to income treatment should apply to the amounts he received. Respondent counters that Section 104(a) (3) requires that the Petitioner include the payments he received on account of personal illness in his income because the Petitioner did not pay for the premiums which generated the payments from MetLife, nor did the contributions made by Petitioner's employer, Grumman, result in any additional income at the time the contributions were made by Grumman during the years when the insurance premiums were paid before Petitioner became ill. Petitioner also argues that there's no Heritage Reporting Corporation (202) 628-4888 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 5 specific evidence that Grumman actually paid additional premiums to Travelers pursuant to the long- term disability agreement between Grumman Corporation, Petitioner's former employer, and Traveler's Indemnity Company. Petitioner maintains that these benefits may have been provided to Grumman Corporation employees because of other insurance arrangements that Traveler's had with Grumman Corporation. In this regard the Court notes that pursuant to Rule 142(a) the Petitioner has the burden of proof in this case, and that that burden is not changed by the application of Section 7491 because Petitioner has not met the requirements of Section 7491 that would enable the burden to shift. Therefore, Petitioner has failed to prove his conjecture that Grumman Corporation did not provide consideration to Traveler's Indemnity for the long-term disability benefits which Petitioner now enjoys. Given Petitioner's failure to prove that Grumman did not pay for those benefits, which seems likely, because insurance companies are not generally in the business of providing free benefits, we turn to an analysis of whether Petitioner's benefits are excludable if in fact Grumman paid or provided some consideration for the benefits and Petitioner did not Heritage Reporting Corporation (202) 628-4888 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 6 pay the premiums nor was Petitioner taxed on the current cost of the premiums before he became ill. Petitioner admits those two circumstances. In this regard Code Section 104(a) (3) appears clear to the Court in providing as follows: "Amounts received through accident or health insurance for personal injuries or sickness (other than amounts received by an employee to the extent such amounts (a) are attributable to contributions by the employer which were not includable in the gross income of the employee, or (b) are paid by the employer.)" The purpose of Section 104(a) (3) is to provide an example of amounts not includable in gross income. So the exclusion of amounts described in the parenthetical has the result of causing such benefits I | to be includable in gross income, and that is precisely the situation we have. We find the facts of this case to be nondististinguishable from the facts of Tuka v. Commissioner 120 T.C. 1, which found such benefits to be taxable under very similar circumstances. We appreciate Petitioners' sincere efforts to analyze the Internal Revenue Code and the agreements involved in this case. However, we simply disagree with his interpretation and find that we are Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 is 16 17 18 19 20 21 22 23 24 2s 7 bound by the prior case law of this Court . Given our analysis a decision will be entered for Respondent. ' This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 2:11 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888