Court Opinion

ID: 9906032
Source: CourtListenerOpinion
Date Created: 2023-11-30 20:02:45.415138+00
Date Added: 2024-06-11T09:24:05.481425
License: Public Domain

United States Tax Court

                        T.C. Summary Opinion 2023-33

                          SEAN PATRICK CANAVAN,
                                 Petitioner

                                           v.

               COMMISSIONER OF INTERNAL REVENUE,
                           Respondent

                                      —————

Docket No. 3621-22S.                                     Filed November 30, 2023.

                                      —————

Sean Patrick Canavan, pro se.

Alexandra G. Corradi, for respondent.

                              SUMMARY OPINION

       PANUTHOS, Special Trial Judge: This case was heard pursuant
to the provisions of section 7463 1 of the Internal Revenue Code in effect
when 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.

      In a notice of deficiency dated November 8, 2021, respondent
determined a deficiency in petitioner’s federal income tax of $2,929 for
taxable year 2019 (year in issue).

       The sole issue for decision is whether payments of $14,714 made
by the Social Security Administration (SSA) to petitioner during the
year in issue are includible in his taxable income.

       1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C., in effect at all relevant times, and Rule references are to the Tax
Court Rules of Practice and Procedure.

                                  Served 11/30/23
                                    2

                              Background

      Some facts have been stipulated and are so found. The First
Stipulation of Facts and the attached Exhibits are incorporated by this
reference. The record consists of the Stipulation of Facts and attached
Exhibits and the testimony of Sean Patrick Canavan. Petitioner resided
in New York when the Petition was timely filed.

      During the year in issue petitioner received seven monthly
benefit payments of $2,102 from the SSA from June through December
2019, a total of $14,714. During the year in issue the SSA determined
that petitioner was not entitled to Supplemental Security Income (SSI)
payments. In a Form 1099–SSA, Social Security Benefit Statement, the
SSA reported to the Internal Revenue Service that petitioner received
$14,714 during the year in issue.

       Petitioner filed his Form 1040, U.S. Individual Income Tax
Return, for tax year 2019. He reported income from an annuity plan.
Petitioner did not report any other income or any benefits from the SSA.

       As a result, respondent issued a notice of deficiency determining
changes to petitioner’s 2019 tax return. Petitioner timely petitioned this
Court.

                               Discussion

I.    Burden of Proof

       Generally, the Commissioner’s determinations in a notice of
deficiency are presumed correct, and the taxpayer bears the burden of
proving that the Commissioner’s determinations are erroneous. See
Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). In cases
involving unreported income however the Commissioner must establish
an evidentiary foundation connecting the taxpayer to the income-
producing activity or demonstrate that the taxpayer actually received
income. Walquist v. Commissioner, 152 T.C. 61, 67 (2019). “Once the
Commissioner makes the required threshold showing, the burden shifts
to the taxpayer to prove by a preponderance of the evidence that the
Commissioner’s determinations are arbitrary or erroneous.” Id. at
67–68. However, the IRS may not rely solely on a third-party report of
income if the taxpayer raises a reasonable dispute concerning the
accuracy of the report. See § 6201(d).
                                           3

      Respondent has met his burden and provided documentation
from the SSA demonstrating that petitioner actually received the
payments in dispute. Petitioner does not dispute that he received the
payments shown on those reports, and he has not challenged the
accuracy of the SSA reports.

II.     Social Security Benefit

       Section 61(a) broadly defines gross income as “all income from
whatever source derived.” The extent to which Social Security benefits
(including disability benefits) are includible in a taxpayer’s income is
determined pursuant to a formula that takes into account the amount
of the taxpayer’s Social Security benefits, the amount of the taxpayer’s
other income, and the taxpayer’s filing status. See § 86. Social Security
benefits are defined as any amount received by the taxpayer by reason
of entitlement to a monthly benefit under the Social Security
Act. § 86(d)(1)(A).

        Petitioner contends that because of his disability, the payments
he received from the SSA are a “survivor benefit” and therefore not
taxable. At trial petitioner testified that he was disabled and that he
had previously received payments from the SSA that were not included
in his income. While respondent conceded that SSI payments would not
be included in taxable income, 2 the record clearly demonstrates that the
SSA did not designate the payments made to petitioner as SSI.

      The record does not support petitioner’s claim that the payments
from the SSA were not includible in his taxable income. 3 As a result the
Court cannot conclude that respondent’s determination is arbitrary or
erroneous. Accordingly, respondent’s determination will be sustained.

        2 This Court has acknowledged the existence of the “general welfare doctrine”

of income exclusion in that government disbursements, like SSI that promote the
general welfare, are not taxable. See Bannon v. Commissioner, 99 T.C. 59, 62–63
(1992).
        3 At trial the Court expressed concern about petitioner’s claimed disability and

the taxable portion of the SSA payments. The Court left the record open to permit
petitioner to provide evidence of disability and documentation of the SSA payments.
Petitioner did not provide such evidence, and the record was closed. Subsequently,
respondent informed the Court that petitioner had provided consent to obtain
documentation from the SSA. As a result, the record was reopened and documentation
from the SSA was entered into the record. As indicated, the documentation did not
support petitioner’s position.
                                   4

       We have considered all arguments, and to the extent not
addressed herein, we conclude that they are moot, irrelevant, or without
merit.

      To reflect the foregoing,

      Decision will be entered for respondent.