Court Opinion

ID: 6335422
Source: CourtListenerOpinion
Date Created: 2022-04-27 16:01:10.157065+00
Date Added: 2024-06-11T09:23:55.804878
License: Public Domain

United States Tax Court
Docket No.: 15059-19                                                                  Page 1 of 1

                                     Washington, DC 20217

  DOUGLASS W. PEGUES,
               Pet it ioner
               v.                                Docket No. 15059-19

  COMMISSIONER OF INTERNAL
  REVENUE,
               Respondent

                                          ORDER

          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 copy of the pages of the transcript of the trial in the above
  captioned case before Judge Christian N. Weiler at Memphis, Tennessee on April 6,
  2022, containing his oral findings of fact and opinion rendered at the trial session at
  which the case was heard.

        In accordance with the oral findings of fact and opinion, decision will be entered
  for respondent.

                                     (Signed) Christian N. Weiler
                                               Judge

                                      Served 04/27/22
                                                                 3
1    Bench Opinion by Judge Christian N. Weiler

2    April 6, 2022

3    Douglass W. Pegues v. Commissioner

4    Docket No. 15059-19

5               THE COURT:   This Court has decided to render

6    oral findings of fact and opinion in this case, and the

7    following represents the Court's oral findings of fact and

8    opinion.   The oral findings of fact and opinion shall not

9    be relied upon as precedent in any other case.

10              This bench opinion is made pursuant to the

11   authority granted by I.R.C. § 7459(b) of the Internal

12   Revenue Code of 1986, as amended, and Rule 152 of the Tax

13   Court Rules of Practice and Procedure.   Unless otherwise

14   indicated, all statutory references are to the Internal

15   Revenue Code, Title 26 U.S.C., in effect at all relevant

16   times, and all Rule references are to the Tax Court Rules

17   of Practice and Procedure.

18              Douglass W. Pegues, petitioner, resided in

19   Alabama at the time his petition was filed; however, he

20   resided in Tennessee at the time of trial and appeared at

21   trial pro se.   Rebecca R. Loveday appeared on behalf of

22   the Commissioner of Internal Revenue, respondent.

23              This case arises from a notice of deficiency

24   dated May 13, 2019, issued to petitioner proposing an

25   increase in tax (or tax deficiency) of $1,055 for the 2016
                                                                 4
1    tax year.     The notice of deficiency makes two adjustments

2    to petitioner's tax return, namely (1) an increase in

3    taxable retirement income by $20,000 and (2) additional

4    taxable interest income by $23.

5                 Petitioner timely filed his petition with the

6    Tax Court on August 14, 2019, disputing only the proposed

7    adjustment to include additional taxable retirement

8    income.     In his petition, and at trial, petitioner did not

9    dispute the adjustment to include taxable interest income.

10   Therefore, the sole issue for decision by the Court is

11   whether petitioner had unreported taxable retirement

12   income for 2016.

13                           Findings of Fact

14                The parties did not file a stipulation of facts

15   prior to trial.     At trial respondent moved to enter six

16   exhibits which were admitted by the Court without

17   objection from petitioner.     On July 2, 2021, respondent

18   filed with the Court and served on petitioner, requests

19   for admissions under Rule 90.     Petitioner failed to file a

20   response to respondent's requests for admissions, and

21   therefore under Rule 90 these requests are deemed admitted

22   and conclusively established.     The facts of this case are

23   not in dispute.

24                Petitioner elected to receive a distribution

25   from his employer retirement plan, State Street Retiree
                                                              5
1    Services/Boeing Voluntary Investment Plan (Boeing), in the

2    amount of $45,000 in 2016.     Utilizing a portion of the

3    elected distribution, petitioner also made a qualifying

4    partial rollover of $25,000.     Boeing withheld federal and

5    state taxes and made a net distribution to petitioner.

6              Boeing issued petitioner a Form 1099 R which

7    reflected a gross retirement distribution of $45,000

8    during 2016.   The Form 1099 R indicated that Boeing

9    withheld $9,000 in federal taxes and $2,000 in state taxes

10   from the gross distribution.

11             Petitioner timely filed his 2016 federal income

12   tax return, and on his return, he reported a taxable

13   retirement distribution from Boeing of $9,000.

14             On May 13, 2019, respondent issued petitioner a

15   Notice of Deficiency for the 2016 tax year due to omitted

16   retirement income and unreported interest.      In his

17   petition, petitioner agreed with the $23 interest income

18   adjustment to his return.

19                               Opinion

20             The Commissioner's determination of a taxpayer's

21   liability in a notice of deficiency normally is presumed

22   correct, and the taxpayer bears the burden of proving that

23   the determination is incorrect.       Rule 142(a); Welch v.

24   Helvering, 290 U.S. 111, 115 (1933).

25             Section 61(a) defines gross income as "all
                                                                   6
1    income from whatever source derived." Pension

2    distributions are includable in income specifically

3    pursuant to section 61(a)(11).     Generally, distributions

4    from qualified retirement plans are includable in the

5    taxpayer's income in the year of distribution.      See I.R.C.

6    § 402(a).     However, an exception exists if the taxpayer

7    transfers any portion of the proceeds received to another

8    eligible retirement plan or an individual retirement

9    account (IRA) within 60 days of the distribution       in

10   other words makes a qualified "rollover." See I.R.C. §§

11   402(c), 408(d)(3).

12               In the case of any designated distribution which

13   is an eligible rollover distribution, the payor is

14   required to withhold 20% of such distribution.      See I.R.C.

15   § 3405(c)(1).    Designated distributions include

16   distributions from employer deferred compensation plans.

17   See I.R.C. § 3405(e)(1)(A)(i).     An employer deferred

18   compensation plan is defined broadly and includes any

19   pension, annuity, stock bonus plan, or other plan that

20   defers the receipt of compensation.     See I.R.C. §

21   3405(e)(5).

22               Petitioner does not dispute that he elected to

23   receive a gross distribution amount of $45,000 from his

24   employer retirement plan.     Petitioner instead avers that

25   he made a qualified rollover of $25,000 of the
                                                              7
1    distribution amount into another qualified retirement plan

2    or IRA at Cadence Bank during 2016, thus the rollover

3    amount is not taxable.   Petitioner further avers that the

4    tax withholdings of $11,000 do not constitute taxable

5    income and therefore his taxable retirement distribution

6    was $9,000 the amount he reported on his tax return.    At

7    trial, petitioner also notes how respondent failed to

8    adjust his tax return when it was originally filed, issued

9    him the full amount of his refund claimed, and therefore

10   contends respondent should be precluded from adjusting his

11   return two years after it was filed.

12             Respondent does not dispute that petitioner made

13   a qualifying rollover of $25,000 during 2016 and does not

14   treat the rollover as taxable in the May 13, 2019, Notice

15   of Deficiency.   Respondent argues that the proper amount

16   of petitioner's taxable retirement income distribution is

17   $20,000 which is the full amount of his gross

18   distribution, $45,000, less petitioner's qualified

19   rollover of $25,000.   We agree with the argument made by

20   respondent.

21             Amounts withheld are in fact taxable income to

22   the taxpayer for whom they are withheld.    See Charczuk v.

23   Commissioner, T.C. Memo. 1983-433, aff'd, 771 F.2d 471

24   (10th Cir. 1985) (citing to Old Colony Trust Co. v.

25   Commissioner, 279 U.S. 716 (1929)).    We find petitioner's
                                                                 8
1    argument that his withholdings are not taxable to be

2    without merit and conclude that the proper amount of

3    petitioner's taxable distribution from his employer

4    retirement plan is $20,000.   Accordingly, we sustain the

5    adjustments made by respondent as found in the Notice of

6    Deficiency issued to petitioner on May 13, 2019.

7              We have considered all remaining arguments made

8    by petitioner and to the extent they are not addressed

9    herein, we find the arguments to be moot, irrelevant, or

10   without merit.

11             Consistent with the preceding discussion,

12   decision will be entered for respondent.   This concludes

13   the Court's oral findings of fact and opinion in this

14   case.

15             (Whereupon, at 10:29 a.m., the above-entitled

16             matter was concluded.)

17

18

19

20

21

22

23

24

25
                                                                9
1            CERTIFICATE OF TRANSCRIBER AND PROOFREADER

2    CASE NAME:    Douglass W. Pegues v. Commissioner

3    DOCKET NO.:   15059-19

4         We, the undersigned, do hereby certify that the

5    foregoing pages, numbers 1 through 9 inclusive, are the

6    true, accurate and complete transcript prepared from the

7    verbal recording made by electronic recording by Adrian

8    Morris on April 6, 2022 before the United States Tax Court

9    at its session in Memphis, TN, in accordance with the

10   applicable provisions of the current verbatim reporting

11   contract of the Court and have verified the accuracy of

12   the transcript by comparing the typewritten transcript

13   against the verbal recording.

14

15

16

17        _______________________________________________

18        Meribeth Ashley, CET-507                4/20/22

19        Transcriber                             Date

20

21

22        _______________________________________________

23        Lori Rahtes, CDLT-108                   4/20/22

24        Proofreader                             Date

25