Court Opinion

ID: 4338896
Source: CourtListenerOpinion
Date Created: 2018-11-14 04:08:24.162103+00
Date Added: 2024-06-11T14:20:47.133453
License: Public Domain

T.C. Summary Opinion 2011-130

                      UNITED STATES TAX COURT

                    LORI MENEFEE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 25050-09S.            Filed November 21, 2011.

     Lori Menefee, pro se.

     Brandon S. Cline, for respondent.

     DEAN, Special Trial Judge:   This case was heard pursuant to

the provisions of section 7463 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.   Unless otherwise indicated, subsequent section references

are to the Internal Revenue Code in effect for the year in issue,
                               - 2 -

and all Rule references are to the Tax Court Rules of Practice

and Procedure.

     Respondent issued a notice of deficiency to petitioner in

which he determined a deficiency of $2,305 for 2007.   The issue

for decision is whether petitioner had income as reported to the

Internal Revenue Service on Form 1099-R, Distributions From

Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs,

Insurance Contracts, etc.1

                             Background

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by reference.   Petitioner resided in Alabama

when she filed her petition.

     Petitioner’s mother was an educator who invested for

retirement in a section 403(b) employee annuity plan (the 403(b))

through the Hartford Board of Education.   The 403(b) was managed

by ING Life Insurance & Annuity Group (ING).   Petitioner was

listed as one of the beneficiaries of the 403(b).2   Petitioner’s

     1
      Respondent also included unreported wage income of $7,
interest income of $128, and dividend income of $571 in
petitioner’s gross income. Petitioner did not address these
items of unreported income in her petition or at trial;
therefore, the Court deems these issues conceded. See Rule
34(b)(4).
     2
      Petitioner was entitled to 33.3 percent of the death
benefit payable from the 403(b). The names of the other
beneficiaries are not part of the record.
                                - 3 -

mother died on November 11, 2006.   On November 27, 2007,

petitioner requested that her portion of the death benefit,

$19,801, be distributed to her.   On the request form petitioner

checked the option to receive a cash withdrawal payable to her

and mailed to her address.   She indicated on the form that she

did not want any Federal or State taxes withheld from the

distribution.   ING issued petitioner a check on November 28,

2007.

     On December 6, 2007, petitioner cashed the check mailed to

her from ING.   On March 3, 2008, petitioner set up an individual

retirement account (IRA) with Morgan Stanley Smith Barney, L.L.C.

(Smith Barney), into which she deposited $19,734 of the

distribution.

     Petitioner timely filed her 2007 Federal income tax return

but did not include the 403(b) distribution of $19,801 in her

gross income.

     Respondent issued petitioner a notice of deficiency that

includes the unreported 403(b) distribution in petitioner’s gross

income.

                             Discussion

     Generally, the Commissioner’s determinations are presumed

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

determinations are erroneous.   Rule 142(a); see INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); Welch v. Helvering, 290
                                  - 4 -

U.S. 111, 115 (1933).    In some cases the burden of proof with

respect to relevant factual issues may shift to the Commissioner

under section 7491(a).    Petitioner did not argue or present

evidence that she satisfied the requirements of section 7491(a).

      If an information return, such as a Form 1099-R, is the

basis for the Commissioner’s determination of a deficiency,

section 6201(d) may apply to shift the burden of production to

the Commissioner if in any court proceeding the taxpayer asserts

a reasonable dispute with respect to the income reported on the

information return and the taxpayer has fully cooperated with the

Commissioner.    See McQuatters v. Commissioner, T.C. Memo. 1998-

88.   As discussed infra, petitioner has failed to assert a

reasonable dispute with respect to the income reported on the

Form 1099-R.    Thus there is no burden shift under section

6201(d).

      Gross income includes all income from whatever source

derived.   Sec. 61(a).   Annuities are specifically included in

gross income.    Sec. 61(a)(9).   In general income is taxable in

the year in which it is received.     See sec. 451(a).   Congress has

provided specialized rules in the employee plan area.     With

respect to a qualified annuity contract described in section

403(b)(1):   “The amount actually distributed to any distributee

under such contract shall be taxable to the distributee (in the
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year in which so distributed) under section 72 (relating to

annuities).”   See sec. 403(b)(1) (flush language).

     The statute does not define “distributee” as used in section

403(b)(1); neither do the regulations.   The Court has concluded

that a distributee of a distribution under a plan ordinarily is

the participant or beneficiary who, under the plan, is entitled

to receive the distribution.   See Darby v. Commissioner, 97 T.C.
51, 58 (1991); Estate of Machat v. Commissioner, T.C. Memo. 1998-

154; Smith v. Commissioner, T.C. Memo. 1996-292.      Petitioner was

a beneficiary of and entitled to a distribution from the 403(b).

Therefore petitioner is a distributee of the 403(b).

     Any transfer of the distribution to an eligible retirement

plan made by the distributee within 60 days of receipt of such

amount “shall not be includible in gross income for the taxable

year in which paid.”   See secs. 403(b)(8), 402(c)(3).    A taxpayer

may also exclude the distribution from gross income if a trustee-

to-trustee transfer is effected.   Secs. 403(b)(8)(B),

402(c)(11)(A)(i).

     Petitioner requested that a check be sent to her from ING

for the amount of the death benefit to which she was entitled.

Approximately 90 days after receipt of the distribution,

petitioner deposited most of it with Smith Barney.     Petitioner’s

transfer falls outside the 60-day period allowed by the statute.

Because petitioner requested that the check from ING be sent
                                 - 6 -

directly to her, no amount of the distribution was a trustee-to-

trustee transfer.   Therefore, the entire distribution is gross

income to petitioner for 2007.    Respondent’s determination is

sustained.

     To reflect the foregoing,

                                              Decision will be entered

                                         for respondent.