Court Opinion

ID: 9948725
Source: CourtListenerOpinion
Date Created: 2024-03-07 20:02:42.563567+00
Date Added: 2024-06-11T14:25:48.308066
License: Public Domain

United States Tax Court

                              T.C. Memo. 2024-27

                 CHARLES SCOTT AND LINDER SCOTT,
                            Petitioners

                                         v.

              COMMISSIONER OF INTERNAL REVENUE,
                          Respondent

                                    __________

Docket No. 17728-21.                                        Filed March 7, 2024.

                                    __________

Charles Scott and Linder Scott, pro se.

Jeremy H. Fetter and Milan H. Kim, for respondent.

                         MEMORANDUM OPINION

      WEILER, Judge: Pursuant to section 6213(a) 1 petitioners,
Charles and Linder Scott, seek redetermination of a $1,638 deficiency in
federal income tax and a $328 accuracy-related penalty under section
6662 determined by the Internal Revenue Service for the 2018 taxable
year. Respondent concedes that petitioners are not liable for the
accuracy-related penalty. Pending before the Court is respondent’s
Motion for Summary Judgment (Motion) filed October 12, 2023. For the
reasons below, we will grant respondent’s Motion.

                                   Background

      The following statements are drawn from the Petition and
respondent’s Motion and are stated only for purposes of resolving the

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

Code, Title 26 U.S.C. (I.R.C. or Code), in effect at all relevant times.

                                Served 03/07/24
                                    2

[*2] Motion. See Cook v. Commissioner, 115 T.C. 15, 16 (2000), aff’d, 269
F.3d 854 (7th Cir. 2001).

       Mr. Scott was formerly a civilian employee for the United States
Air Force in San Antonio, Texas, and retired in the 1990s. For the 2018
taxable year, Mr. Scott received a Civil Service Retirement System
disability payment of $13,356. Receipt of this payment was confirmed
by a Form 1099–R, Distributions From Pensions, Annuities, Retirement
or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., issued by the
Office of Personnel Management to Mr. Scott for the 2018 tax year.
Petitioners resided in Texas when they timely filed their Petition.

                               Discussion

       Summary judgment serves to “expedite litigation and avoid
unnecessary and expensive trials.” Fla. Peach Corp. v. Commissioner,
90 T.C. 678, 681 (1988). We may grant summary judgment when there
is no genuine dispute of material fact and a decision may be rendered as
a matter of law. Rule 121(a)(2); Sundstrand Corp. v. Commissioner, 98
T.C. 518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994). In deciding
whether to grant summary judgment, we construe factual materials and
inferences drawn from them in the light most favorable to the
nonmoving party. Sundstrand Corp., 98 T.C. at 520. The nonmoving
party may not rest upon mere allegations or denials in its pleadings but
must set forth specific facts showing there is a genuine dispute for trial.
Rule 121(d); see also Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).

       Gross income generally includes all income from whatever source
derived, including annuities. I.R.C. § 61(a)(8). Petitioners do not dispute
receipt of the disability payment reported on Form 1099–R, for the 2018
tax year. Rather, petitioners excluded this sum on their 2018 federal
income tax return and contend that Mr. Scott’s retirement payments do
not constitute taxable income.

       Section 104 is a provision of the Code which excludes certain
forms of compensation for injuries or sickness from gross income. In
pertinent part section 104(a)(4) excludes amounts received by a
taxpayer as a pension, annuity, or similar allowance for personal
injuries or sickness. However, the underlying injury or sickness must be
attributable to active service in the armed forces, the Coast and Geodetic
Survey, or the Public Health Service. See I.R.C. § 104(a)(4). Section
104(a)(4) also excludes amounts received as a disability annuity paid
pursuant to section 808 of the Foreign Service Act of 1980.
                                    3

[*3] This Court has previously found that federal civil service
disability retirement payments constitute gross income where the
taxpayer fails to otherwise demonstrate the applicability of an
exclusionary provision of the Code, such as section 104. See, e.g., Green
v. Commissioner, T.C. Memo. 2008-130, aff’d per curiam, 322 F. App’x
412 (5th Cir. 2009); French v. Commissioner, T.C. Memo. 1991-417, 1991
Tax Ct. Memo LEXIS 466, at *4–5; Flaherty v. Commissioner, T.C.
Memo. 1987-61, 1987 Tax Ct. Memo LEXIS 57, at *6.

       This is not the first time we have considered these petitioners’
arguments. In a prior proceeding we ruled against these same
petitioners, considered these same arguments, and ultimately
determined that these disability payments to Mr. Scott are taxable,
since we found no evidence to suggest that the payments at issue were
attributable to an injury or sickness sustained through Mr. Scott’s active
service in the armed forces, the Coast and Geodetic Survey, or the Public
Health Service. See Scott v. Commissioner, No. 3330-18 (T.C. Oct. 22,
2021) (No. 52).

     Again, considering the evidence before us, we hold petitioners’
argument to be without merit, and we will sustain the adjustment to
income as determined in the notice of deficiency.

       We take this opportunity to warn petitioners that the continued
assertion of these same arguments, having now been considered twice
by this Court, may result in a penalty of up to $25,000 under section
6673(a).

      To reflect the foregoing,

      An appropriate order and decision will be entered.