Douglass W. Pegues

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 —