In Uncategorized on 03/11/2020 at 16:46

What You Never Got

After once again lamenting the constricted jurisdiction of pore l’il ole Tax Court, Judge Elizabeth A. (“Tex”) Copeland imparts the above lesson to Mark Alan Staples, 2020 T. C. Memo. 34, filed 3/11/20. Mark Alan is a disabled retiree from the US Patent Office. When he sought his pension from FERS (Federal Employees Retirement System), the Federal Retirers sent him off to get SSDI, which he did. Whereupon the Federal Retirers mulcted Mark Alan for the amount he got from SSDI against his FERS pension payments.

FERS did a couple re-sets (hi, Judge Holmes) over a couple years (hi again), chopping and changing the cut-outs, which Mark Alan protested, but when told to try it with Merit Systems Protection Board (apparently the appeals crowd for such cases), Judge Tex can’t find that Mark Alan did pursue his administrative remedies.

Howbeit, Mark Alan took a loss on his income tax return for the mulcts aforesaid.

Judge Tex says no can do.

“Petitioner contends that the reduction of his FERS annuity was a loss which he should be able to account for by deducting it from his income.  He claims the loss is akin to a gambling loss, casualty loss, disaster loss, theft loss, or business loss.  However, petitioner did not experience a gambling, casualty, disaster, theft, or business loss….  Instead, he did not receive additional anticipated income which, if received, would have been subject to tax.  There was no receipt of that income and thus no tax and likewise no applicable deduction.  We disagree with petitioner’s contention because he cannot deduct a loss for unrealized income.” 2020 T. C. Memo. 34, at pp. 8-9.

Then, having canvassed the FERS cut-outs of SSDI through judicial interpretation, legislative history and statutory construction, Judge Tex returns to the plight of pore l’il ole Tax Court.

“…we lack jurisdiction to decide employee benefit entitlement issues that fall within the purview of the various Federal agencies. However, we have jurisdiction under sections 6213 and 6512(b)(1) to redetermine an income tax deficiency or to determine an overpayment by petitioner.  The sole issue before us is whether the reduction to petitioner’s FERS annuity was a loss for which he is entitled to a deduction in the amount of the reduction.  In other words, petitioner seeks a deduction for an amount of income which he expected to realize but did not.

“Petitioner is a cash basis taxpayer.  It is well established that no deduction is allowed under any Code section for the loss of unrealized income by a cash basis taxpayer.” 2020 T. C. Memo. 34, at p. 11. (Copious citation of precedent and somber reasoning omitted).

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