An IRS tax auditor and his wife could not exclude Social Security disability benefits from their gross income. Although the wife had been injured at work, her Social Security disability benefits could not be treated as nontaxable workmen's compensation benefits because they were provided under the Social Security Act. The Social Security Act is not considered to be a statute in the nature of workmen's compensation because it provides for disability benefits for an injury regardless of whether the injury occurred in the course of employment. See Code Sec. 165(c)
with respect to an uncollected damage award for personal injuries that the wife sustained outside of her job.
The loss was not incurred in a trade or business or in a transaction entered into for profit. Further, the taxpayers could not claim a casualty loss deduction because they did not establish any tax basis in the judgment. Code Sec. 6662 penalty was sustained against a married couple. The penalty was appropriate in light of the husband's work as an IRS auditor and the relatively straightforward adjustments at issue. --
Theodore Major Green and Jacqueline Green v. Commissioner.Dkt. No. 5216-06 , TC Memo. 2007-217, August 7, 2007.[
SWIFT, Judge: This matter is before us on respondent's motion for summary judgment under Rule 121.
Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for 2003, and all Rule references are to the Tax Court Rules of Practice and Procedure.
The issues for decision are: (1) Whether taxable Social Security benefits petitioner Jacqueline Green received in 2003 should be treated as nontaxable workmen's compensation benefits; and (2) whether petitioners may deduct from 2003 income $11,068 relating to a $166,013 damage award judgment that Jacqueline Green never received and that has now been discharged in bankruptcy.
Hereinafter, references to petitioner in the singular are to petitioner Jacqueline Green.
At the time the petition was filed, petitioners resided in Moorpark, California. From 1985 to September 19, 2005, Mr. Green worked as a tax auditor for respondent.Petitioner's Social Security Benefits
Prior to November 12, 1989, petitioner worked on a General Motors assembly line.
In November of 1989 petitioner was injured while shopping for groceries. This was unrelated to her employment at General Motors Corporation (General Motors). The injury was caused by a shopping cart under the control of another person. Injuries petitioner sustained therefrom apparently prevented petitioner from further assembly line work at General Motors. Petitioner continued to work for General Motors but as a decal assembler.
On November 7, 1990, petitioner filed a lawsuit for personal injury damages against the person who was pushing the shopping cart.
On or about August 27, 1991, petitioner was involved in another accident, this time while at work at General Motors, as a result of which petitioner sustained additional injuries. Petitioner's injuries required surgery and left her unable to work.
On August 6, 1992, petitioner filed a claim for Social Security disability benefits, and on December 17, 1993, petitioner began receiving Social Security disability benefits.
In addition to her claim for Social Security disability benefits, petitioner filed a claim for California workmen's compensation benefits. The record does not reflect that petitioner ever received any benefits under her workmen's compensation claim.
On November 12, 1996, petitioner obtained a $166,013 default judgment for personal injury damages against the person who was pushing the shopping cart that injured petitioner in 1989.
On or about March 14, 1997, in a bankruptcy proceeding, the person against whom petitioner obtained the default judgment was discharged of liability to pay the $166,013 judgment petitioner had obtained, and petitioner never collected anything on the judgment. Petitioner never included any portion of the $166,013 judgment in taxable income, and the record does not establish that petitioner had any tax basis in the uncollected judgment.
On their 1997 joint Federal income tax return filed with respondent, petitioners reported as taxable $5,789 of the Social Security benefits petitioner received in 1997, and petitioners claimed a $11,068 casualty loss deduction relating to the above $166,013 uncollected judgment. Petitioners also attached to their 1997 tax return a statement that they intended to deduct the balance of the $154,946 uncollected judgment over the course of the next 15 years --$11,068 in each year --as a loss carryforward.
When no material fact remains at issue, we may grant summary judgment as a matter of law. Rule 121(b); Fla. Country Clubs, Inc. v. Commissioner, 122 T.C. 73, 75-76 (2004), affd. on other grounds 404 F.3d 1291 (11th Cir. 2005). Because of the parties' admissions and deemed admissions as to material facts, no material fact remains at issue.Social Security Benefits
Generally, taxpayers who file a joint return and receive Social Security benefits and whose modified adjusted gross income plus half of Social Security benefits received in a year exceeds $32,000 are to include in taxable income a portion of the Social Security benefits received in a year. Sec. 86(d)(1); Joseph v. Commissioner, T.C. Memo. 2003-19.
Benefits received under a workmen's compensation statute or other statute authorizing benefits in the nature of workmen's compensation may not be included in income.
Petitioner's Social Security disability benefits received in 2003 were provided to petitioner under the Social Security Act. Because the Social Security Act is not a statute in the nature of workmen's compensation, petitioners must include in gross income for 2003 $11,227 of the $13,208 in Social Security disability benefits that petitioner received in 2003, as per the calculation provided under Section 165(c) provides a deduction from income for taxpayers who incur an uncompensated loss relating to a trade or business, to a transaction entered into for profit, or to a casualty resulting in an uncompensated loss of property.
Petitioner's $166,013 uncollected judgment involving the shopping cart was personal in nature and had no connection with petitioner's trade or business or with a transaction entered into for profit.
Petitioner was not premitted a
The above tax basis limitation set forth in the regulations prevents petitioners herein from obtaining a casualty loss deduction relating to petitioner's uncollected judgment. Petitioner did not include any portion of the $166,013 uncollected judgment in income and did not establish any tax basis therein.
Alvin S. Brown
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