Hay v. Commissioner

1982 T.C. Memo. 343, 44 T.C.M. 172, 1982 Tax Ct. Memo LEXIS 400
United States Tax Court·Decided June 21, 1982·No. Docket No. 6834-80.·Unpublished

Opinion

RALPH E. HAY AND EVELYN F. HAY, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Hay v. Commissioner
Docket No. 6834-80.
United States Tax Court
T.C. Memo 1982-343; 1982 Tax Ct. Memo LEXIS 400; 44 T.C.M. (CCH) 172; T.C.M. (RIA) 82343;
June 21, 1982.

*400Held: For income averaging purposes in computational year 1977, negative taxable income for the 4 base years must be adjusted to zero pursuant to section 1.1302-2(b)(1), Income Tax Regs., prior to addition of the zero bracket amount as required by section 1302(b)(3) of the Internal Revenue Code.

Jack Miller, for the petitioners.
Alan J. Pinner, for the respondent.

IRWIN

MEMORANDUM OPINION

*401IRWIN, Judge: Respondent determined a deficiency of $1,725 in petitioners' Federal income tax for 1977. The sole issue for our decision is whether for purposes of income averaging petitioners are required to adjust their negative taxable income figures for their 4 base period years to zero in accordance with section 1.1302-2(b)(1), Income Tax Regs., prior to addition of the zero bracket amount.

All of the facts have been stipulated and are found accordingly. The stipulation of facts and the attached exhibits are incorporated herein by this reference.

Petitioners were residents of Malibu, California, at the time of the filing of the petition in the instant case. During 1977 petitioners were married to each other and filed a joint Federal income tax return for that taxable year. On their 1977 return, petitioners elected the benefits of income averaging on Schedule G of Form 1040. They computed taxable income for their 4 base period years as follows:

1976 1197519741973
Adjusted Gross$ 3,186 $ 2,008 $ 3,074 $ 1,189 
Income
Less: Standard(2,100)(1,900)(1,300)(1,300)
Deduction
Less: Personal(3,000)(3,000)(3,000)(3,000)
Exemption
Taxable Income$ (1,914)$ (2,892)$ (1,226)$ (3,111)
*402

Petitioners then added the zero bracket amount 2 ($3,200) to each of the negative taxable income figures for the base period years to arrive at base period income, as follows:

1976197519741973
Taxable Income$ (1,914)$ (2,892)$ (1,226)$ (3,111)
Plus: Zero3,200 3,200 3,200 3,200 
Bracket Amount
Base Period$ 1,286 $ 308 $ 1,974 $ 89 
Income

In the notice of deficiency dated March 3, 1980, respondent determined that the correct base period income figure for each of the years 1973 through 1976 was $3,200 and not the lessor amounts asserted by petitioners.

The income averaging provisions of the Code, sections 1301 3 through 1305, were enacted in 1964 to mitigate the harsh effect that the progressive*403 tax rate structure has upon taxpayers who have wildly fluctuating incomes.

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Hay v. Commissioner, 1982 T.C. Memo. 343, 44 T.C.M. 172, 1982 Tax Ct. Memo LEXIS 400 (tax 1982).

1982 T.C. Memo. 343 (Hay v. Commissioner) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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