Porter v. Commissioner

88 T.C. No. 28, 88 T.C. 548, 1987 U.S. Tax Ct. LEXIS 30, 8 Employee Benefits Cas. (BNA) 1374
CourtUnited States Tax Court
DecidedMarch 5, 1987
DocketDocket Nos. 19340-84, 19368-84, 26149-84, 29669-84, 39130-84
StatusPublished
Cited by11 cases

This text of 88 T.C. No. 28 (Porter v. Commissioner) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Porter v. Commissioner, 88 T.C. No. 28, 88 T.C. 548, 1987 U.S. Tax Ct. LEXIS 30, 8 Employee Benefits Cas. (BNA) 1374 (tax 1987).

Opinion

Fay, Judge:

Respondent determined Federal income tax and excise tax deficiencies as follows:

Petitioners Year in issue Income tax Excise tax deficiency deficiency
Judge and Mrs. Donald J. Porter 1980 $924.00 $90.00
Judge and Mrs. Arlin M. Adams 1980 687.69 76.80
Judge and Mrs. William J. Nealon, Jr. 1981 725.61 90.00
Judge and Mrs. Clarence C. Newcomer 1981 846.03 105.00
Judge and Mrs. Daniel H. Huyett III 1981 825.00 290.00

The issues for decision are whether petitioners are entitled to deduct amounts contributed to individual retirement accounts (hereinafter IRA’s) under section 219 or section 220, and whether petitioners are hable for the excise tax of 6 percent that is imposed by section 4973 on “excess contributions” to IRA’s.3

FINDINGS OF FACT

Most of the facts have been stipulated and are found accordingly. The stipulations and the exhibits attached thereto are incorporated herein by this reference.

With the exception of Judge and Mrs. Porter, all petitioners filed their petitions herein while residing in Pennsylvania and filed joint income tax returns for the years in issue with the Internal Revenue Service Center, Philadelphia, Pennsylvania. Judge and Mrs. Porter filed their petition herein while residing in South Dakota and filed a joint income tax return for their year in issue with the Internal Revenue Service Center, Ogden, Utah. For the years in issue, Judge Adams was a U.S. Circuit Court judge and all of the remaining judge petitioners were U.S. District Court judges. Pursuant to article III, section 1, of the U.S. Constitution, all of the judge petitioners are entitled to hold office for life during good behavior and to receive a salary which cannot be diminished.

Sections 371 and 372 of title 28 of the United States Code (hereinafter sometimes referred to as the Judicial Code) establish several mechanisms by which a judge or Justice who holds office for life during good behavior (hereinafter article III judge), such as the judge petitioners herein, may separate from regular active service and continue to receive payments from the United States.4 We will briefly describe each of these mechanisms.

Pursuant to section 371(a) of the Judicial Code, an article III judge who is at least 70 years of age and has served at least 10 years may resign and continue to receive the salary he was receiving at the time of his resignation for the rest of his life. A resigned article III judge no longer holds office5 and can no longer perform judicial services.6

An article III judge who is at least 70 years of age and has served at least 10 years or who is at least 65 years of age and has served at least 15 years may retire and continue to receive the salary of the office7 for the rest of his life pursuant to section 371(b) of the Judicial Code. A retired article III judge continues to hold office8 and continues to perform judicial services as he is willing and able to do so.9

Pursuant to section 372(a) of the Judicial Code, an article III judge who is permanently disabled and has served at least 10 years may retire and continue to receive the salary of the office for the rest of his life, and an article III judge who is permanently disabled and has served less than 10 years may retire and continue to receive one-half the salary of the office for the rest of his life. A voluntarily retired disabled article III judge continues to hold office10 and continues to perform judicial services as he is willing and able to do so.11

An article III judge who is permanently disabled is not required to retire pursuant to section 372(a) of the Judicial Code. Pursuant to section 372(b) of the Judicial Code, a disabled article III judge’s failure to retire under section 372(a) of the Judicial Code may, under certain circumstances, give rise to an appointment by the President of an additional judge to the court on which the unretired disabled judge sits.12 However, the failure to retire and the appointment of an additional judge will not affect an unretired disabled article III judge’s right to continue to hold office13 or his right to continue to receive the salary of the office for life during good behavior.14

Each judge petitioner established an IRA to which he made timely cash contributions which, if deductible, were not in excess of the applicable limits for the years of the contributions. Respondent disallowed each deduction and determined (or asserted, see note 2 supra) income and excise tax deficiencies for the years and in the amounts previously indicated.

OPINION

Section 219 allows an individual a deduction for amounts paid in cash to an IRA for the benefit of such individual. Section 220 allows an individual a deduction for amounts paid in cash to an IRA for the benefit of such individual and his spouse. Respondent claims that petitioners are not entitled to their claimed IRA deductions because of section 219(b)(2)(A)(iv) and section 220(b)(3)(A)(iv).15 These sections disallow the deduction in a taxable year in which any person for whose benefit the IRA was established is an “active participant” in “a plan established for its employees by the United States.”16 As a result of stipulations,17 our inquiry with respect to the deductibility of the IRA contributions is limited to determining whether the judge petitioners were active participants in a plan established by the United States for its employees.

As indicated in the findings of fact, several mechanisms exist whereby article III judges can continue to receive payments from the United States after separation from regular active service. Before considering whether such mechanisms are “plans” within the meaning of section 219(b)(2)(A)(iv) or whether the judge petitioners were “active participants” therein, we will first consider whether article III judges are “employees” of the United States. If article III judges are not employees, section 219(b)(2)(A)(iv) will not apply because the article III judges would not be active participants in a plan established by the United States for its employees.

In determining whether article III judges are employees within the meaning of section 219, we must determine which definition of employees should be utilized. There are various definitions of employee and the results obtained under the various definitions may differ. Under the definition of employee generally used with respect to the organization of the Federal Government, article III judges are clearly employees of the United States. 5 U.S.C. sec. 2105 (1982). However, under the definition of employee for purposes of Civil Service retirement, article III judges are clearly not employees of the United States. 5 U.S.C. sec. 8331(1) (1982).

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Porter v. Commissioner
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Bluebook (online)
88 T.C. No. 28, 88 T.C. 548, 1987 U.S. Tax Ct. LEXIS 30, 8 Employee Benefits Cas. (BNA) 1374, Counsel Stack Legal Research, https://law.counselstack.com/opinion/porter-v-commissioner-tax-1987.