TAX COURT OPINION

Case: Alice Dianna Combs
Docket Number: 908-12S
Judge: Holmes
Opinion Type: bench
Filed: 02/27/2013
Pages: 5

UNITED STATES TAX COURT WASHINGTON, DC 20217 SEC ALICE DIANNA COMBS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) O R D E R Docket No. 908-12S. 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 cop(cid:0)570of transcript of Holmes at Chicago, findings of which the case was heard. fact and opinion rendered at the trial in the above case before Judge Mark V. IL, on February 4, 2013, containing his oral the pages of the the trial session at In accordance with the oral findings of fact and opinion, a decision for Respondent will be entered. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. February 27, 2013 SERVEDMar042013 Capital Re orting Company 3 1 2 Bench Opinion by Judge M rk V. Holmes February 4, 2013 3 Alice Dianna Combs 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Docket No. 908-12S THE COURT : In the case of Alice Dianna Combs v. Commissioner, Dòcket Number 908-12S, the Court has decided to render oral findings of fact and opinion and the followinÔ represents the Court' s oral findings of fact and opipion. This bench opinion is made pursuant to the autþority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court' s Rules of Practice and Procedure. The record indicates and consists of the stipulation that Ms . Combs agreed to with the government as well as her own testimony, which I found to be highly credible. She is a resident of Illinois and was when she filed her petition. She is a hard-working woman who works as a nanny in the year in question. The issue is whether she received $1,755 in interest income that she did not report and $586 in unreported wages she admitted, and I find her completely honest in this and other respects that she did receive these am unts of money. I believe her ntirely that she didn't know 866. 88.DEPO www.CapitalRe ortingCompany.com Capital Rep rting Company 1 2 3 4 the difference between a 1099 and W-2, but I believe entirely that she figured that she was just going to report what she was getting in the sense of forms and it would sort itself out because she had wages 5 withheld and that all sorts out. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 If this were s mply a case about whether the government was going to charge her with negligence for not repor ing this income, there is no way I would have found h r negligent under these circumstances. The real problèm here is that Ms. Combs has a son and she wanted the earned income tax credit. She earn a reasonabl m dest living as a nanny, as said, in tax year 2009. And the earned income tax credit, of course, is me nt to bolster the income of people in the working class who do work for wages. And this case shows one gf the problems in that system, because when you take the money you got, and this was interest income and not, of course, from bonds and muni' s and the like, it was savings bonds . And part of savings bond is interest that gets built up over time and it's called by lawyers, imputed interest or something li e that, I guess, built-up interest. The problem is what when you cash them out 866.488.DEPO www.CapitalReþortingCompany.com Capital Reporting Company . 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 you're not getting the face of bonds; you're getting that plus a lot of inter st. And in your case, Ms. Combs, this increased your interest income to $3,597. Not a gargantuan sum in the grand scheme of things, but Congress in its wisddm, has as part of the Internal Revenue Code, section 32(i) (2) (a), which makes people ineligible for the earned income tax credit if they receive certain amounts of prohibited income or excess income. One of the categories of such income is || interest income and in Revenue Procedure 2008-66 the amount was set at $3,100 kin interest income. In other words, no matter how hard you work at your job and no matter how low yo r wages are, if you have 15 more than $3, 100 in interest income for the tax year 16 17 18 19 20 21 22 23 24 25 2009 you lose the entire earned income tax credit. The numbers unfortunately, Ms. Combs, are what they are. You earned $497 in excess interest income because you invested in U.S. government savings bonds that you cashed out after the beginning 11 of the worst recession since the Great Depression. This meant that you lose $2, 119 in earned income tax credit, which means that you, a working class woman 1. in Chicago, faced a marginal tax rate of 426 percent. This is outrageous and obscene. It is, however, what 866.488.DEPO www.CapitalReportingCompany.com li Capital Rep(orting Company 6 I have to follow since I apply the rule and do not apply norms of justice. ,I must rule for the government and for the tax year 2009 Ms. Combs owes a deficiency of $2,119. The government is to be commended on not charging her with a penalty in addition to this obvious y unjust result, but so it goes. This concludes the Court's oral findings of fact and opinion in this case. Sorry for the bad news, Ms. Combs, but consult a tax lawyer when you're cashing in an extra couple hundred dollars in bonds. MS. COMBS: Thànk you. (Whereupon, at 3:50 p.m., the above entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com