Dovid & Marcia L. Goldfarb, Petitioner

T .C . Summary Opinion 2007-4 1

UNITED STATES TAX COURT

DOVID AND MARCIA L . GOLDFARB, Petitioners v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 21305-05S .

Filed March 13, 2007 .

Dovid and Marcia L . Goldfarb, pro sese .

Miriam C . Dillard and Jeffrey S . Luechtefeld , for respondent .

PANUTHOS, Chief Special Trial Judge : This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect at the time the petition was filed . The decision to be entered is not reviewable by any other court, and this opinion should not be cited as authority . Unless otherwise indicated, subsequent section references are to the Interna l S RVEf MAR 13 2007 Revenue Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure .

Respondent determined a $2,053 deficiency in petitioners ' 2003 Federal income tax . The issues for decision are : (1) Whether Social Security disability benefits received by petitioner Marcia Goldfarb are taxable, and (2) whether respondent is estopped from determining a deficiency agains t petitioners with respect to the benefits .'

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

The stipulation of facts and attached exhibits are incorporated herein by this reference . At the time the petition was filed, petitioners resided in Wesley Chapel, Florida . Unless otherwise indicated, references to petitioner are to Marcia Goldfarb .

Petitioner formerly worked for the Montgomery County, Maryland, police department . In 1998, petitioner retired due to a work-related injury that left her disabled and began receiving Social Security disability benefits . In 2003, petitione r received $13,524 of disability benefits from the Social Security Administration .

Petitioners filed a joint 2003 Federal income tax return reporting $76,633 of adjusted gross income . This amount did no t ' Petitioners filed a Motion for Summary Judgment on Dec . 5, 2006 . For the reasons discussed infra , we shall deny petitioners' motion .

include the $13,524 of Social Security benefits that petitioner received . Respondent issued petitioners a notice of deficiency in August 2005 . Respondent determined that $11,495 of the benefits was taxable, representing 85 percent of the amount received .2 Discussion In general, the Commissioner's determinations set forth in a notice of deficiency are presumed correct, and the taxpayer bears the burden of showing that the determinations are in error . Rule 142(a) ; Welch v . Helvering , 290 U .S . 111, 115 (1933) . Pursuant to section 7491(a), the burden of proof as to factual matters shifts to the Commissioner under certain circumstances . Because we decide this case without regard to the burden of proof, we need not decide whether section 7491(a) applies .

1 .

Social Security Benefit s Section 86 requires the inclusion in gross income of up to 85 percent of Social Security benefits received .

Reimels v .

Commissioner , 123 T .C . 245, 247-248 (2004), affd . 436 F .3d 344 (2d Cir . 2006) ; Green v . Commissioner , T .C . Memo . 2006-39 . In contrast, "amounts received under workmen's compensation acts a s

compensation for personal injuries or sickness" generally are not included in gross income . Sec . 104(a)(1) .

Petitioners contend that the Social Security disability benefits constitute workmen's compensation within the meaning of section 104(a) . We have previously held, however, that Social Security disability benefits are not workmen's compensation .

Green v . Commissioner , supra . A statute is in the nature of a workmen's compensation act if it allows disability payments solely for service-related personal injury or sickness .

Haar v .

Commissioner , 78 T .C . 864, 868 (1982), affd . 709 F .2d 1206 (8th Cir . 1983) ; Byrne v . Commissioner , T .C . Memo . 2002-319 . The Social Security Act does not qualify because it allows for disability payments regardless of whether the individual was injured in the course of employment . See 42 U .S .C . sec .

423(d)(1)(A)(2000) ; Green v . Commissioner , supra .

Accordingly, the Social Security benefits that petitioner received are includable in gross income as provided by section 86 .

Section 86 taxes Social Security benefits pursuant to a formula . Married taxpayers filing a joint return whose modified adjusted gross income plus one-half of their Social Security benefits exceeds an "adjusted base amount" of $44,000 must include up to a maximum of 85 percent of their Social Security benefits in gross income .

Mikalonis v . Commissioner , T .C . Memo .

2000-281 . Subject to exceptions not relevant here, modified adjusted gross income means adjusted gross income (AGI) .

Petitioners filed a joint return and reported AGI of $76,633 . Adding one-half of the $13,524 of the Social Security benefits to the reported AGI yields a total of $83,395 . Because this amount exceeds $44,000, petitioners must include up to 85 percent of the Social Security benefits in gross income .

Petitioners do not dispute that their AGI exceeded $44,000 .

Petitioners argue, however, that only the income of the recipient of Social Security benefits is relevant for purposes of section 86 . Petitioners note that .section 86 refers to "taxpayer" in the singular and not "taxpayers" in the plural . For example, section 86(b) (1) (A) (i) refers to "the modified adjusted gross income of the taxpayer" . Petitioners contend that Mr . Goldfarb's income therefore should be excluded from AGI in applying the formula under section 86 . Because petitioner's income alone did not exceed $44,000, petitioners contend, a lesser amount of Social Security benefits is taxable . We disagree .

"In determining the meaning of any Act of Congress, unless the context indicates otherwise--words importing the singular include and apply to several persons, parties, or things" . 1 U .S .C . sec . 1 (2000) . This rule applies "where it is necessary to carry out the evident intent of the statute ."

First Natl .

Bank in St . Louis v . Missouri , 263 U .S . 640, 657 (1924) ; Pope & Talbot, Inc ., & Subs . v . Commissioner , 104 T .C . 574, 582 (1995), affd . 162 F .3d 1236 (9th Cir . 1999) .

Although section 86 refers to a "taxpayer", a joint return is treated as the return of a taxable unit, and the net income reported on the return is subject to tax as though the return were that of a single individual .

Boehm v . Commissioner , T .C .

Memo . 1999-227 (citing Helvering v . Janney , 311 U .S . 189, 192 (1940)) . In applying the formula in section 86 to case s involving a joint return, we have not distinguished between income earned by the recipient of Social Security benefits and income earned by the recipient's spouse . See, e .g ., Reimels v .

Commissioner , supra at 247-248 ; Green v . Commissioner , supra ; Penn v . Commissioner , T .C . Memo . 2001-267 ; Thomas v .

Commissioner , T .C . Memo . 2001-120 .

Petitioners' interpretation of section 86 would lead to incongruous results . For example, as discussed above, the amount of taxable Social Security benefits is calculated by reference to an adjusted base amount . The higher the adjusted base amount, the lower the amount of taxable Social Security benefits . In general, the adjusted base amount is $34,000 . In the case of a joint return, however, the adjusted base amount is increased to $44,000 .

If we were to adopt petitioners' theory, a married taxpayer filing jointly would receive the benefit of a higher adjusted base amount despite being able to exclude her spouse's income from AGI . Application of this theory would cause inconsistent results . Rather, we conclude section 86 provides a greater adjusted base amount in the case of a joint return because tax is computed on the married individuals' aggregate income . See sec .

6013(d)(3) ; see also Anderson v . Commissioner , 77 T .C . 1271, 1272 (1981) (holding that the phrase "every person" in section 56(a) (as in effect for 1976) "refers to all persons (singularly or plural)") ; Boehm v . Commissioner , supra .

We conclude that in the case of a joint return, modified adjusted gross income under section 86 includes the income of each spouse . Respondent's determination is therefore sustained .

2 .

Estoppe l Petitioner has received Social Security benefits for a number of years . Petitioners contend that on their joint 2000, 2001, and 2002 returns they did not report the Social Security benefits as income . Petitioners further contend that respondent examined those returns but eventually determined that the benefits were not taxable . Petitioners therefore believe that respondent should be estopped from including the benefits in their gross income for subsequent years .

Equitable estoppel is a judicial doctrine that precludes a party from denying his own acts or representations that induced another to act to his detriment .

Hofstetter v . Commissioner , 98 T .C . 695, 700 ( 1992 ) .

It is well settled , however, that the Commissioner cannot be estopped from correcting a mistake of law, even where a , taxpayer may have relied to his detriment on that mistake .

Norfolk S . Corp . v . Commissioner , 104 T .C . 13, 59-60 (1995 ), affd . 140 F . 3d 240 ( 4th Cir . 1998) . An exception exists only in the rare case where a taxpayer can prove he or she would suffer an unconscionable injury because of that reliance .

The following conditions must be satisfied before equitable estoppel will be applied against the Government : (1) A false representation or wrongful, misleading silence by the party against whom the opposing party seeks to invoke the doctrine ; (2) an error in a statement of fact and not in an opinion or statement of law ; ( 3) ignorance of the true facts ; ( 4) reasonable reliance on the acts or statements of the one against whom estoppel is claimed ; and (5 ) adverse effects of the acts or statements of the one against whom estoppel is claimed .

Id .

Even if respondent did not adjust petitioners' prior tax returns, respondent is not precluded from asserting a deficiency with respect to the Social Security benefits for 2003 . Each taxable year stands on its own, and the Commissioner may challenge in a succeeding year what was overlooked in previous years . See, e .g ., Rose v . Commissioner , 55 T .C . 28, 31-32 (1970 ) ; Blodgett v . Commissioner , T .C . Memo . 2003 - 212, affd . 394 F .3d 1030 ( 8th Cir . 2005) . Petitioners have not shown that they would suffer unconscionable injury as a result of relying on respondent's acceptance of the previously filed returns .

Furthermore, respondent's error, if any, was in a statement of law . We therefore conclude that respondent is not estopped from asserting a deficiency for 2003 with respect to the Social Security benefits . Respondent's determination is sustained .

Reviewed and adopted as the report of the Small Tax Case Division .

To reflect the foregoing, An appropriate order an d decision will be entered .

2. The notice of deficiency indicates the taxable amount was $11,495 . The stipulation of facts, however, states that respondent determined $11,485 of the disability benefits to be taxable . Although the discrepancy has not been explained, we assume the figure used in the notice of deficiency is correct .