93-0788
Income
Signed 1/12/94
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
XXXXX, )
:
Petitioner, ) FINDINGS OF
FACT,
: CONCLUSIONS OF LAW,
v. ) AND FINAL DECISION
:
OPERATIONS
DIVISION OF THE ) Appeal No. 93-0788
UTAH STATE TAX
COMMISSION, :
) Account No. XXXXX
Respondent. :
_____________________________________
STATEMENT OF
CASE
This appeal came before the Utah State
Tax Commission for a formal hearing on XXXXX.
Alan Hennebold, Administrative Law Judge, heard the matter on behalf of
the Commission. XXXXX, C.P.A.,
represented Ms. XXXXX. XXXXX, Assistant
Utah Attorney General, represented the Operations Division.
Prior to the hearing, the parties
submitted a stipulation of facts. Based
on the parties' stipulation, the Tax Commission hereby makes its:
FINDINGS OF FACT
1.
The tax year in question is XXXXX.
2.
The tax type is individual income.
3.
Petitioner is a divorced single woman filing tax returns as head of
household.
4.
The Petition for Redetermination was filed after an adjustment to
Petitioner's XXXXX individual income tax in the amount of $$$$$, plus penalty
of $$$$$.[1]
5.
The additional tax assessed by the Division resulted from the Division's
disallowance of the retirement income deduction of $$$$$ claimed by Petitioner
on line 10 of her XXXXX TC40 return.
6.
The income in question was paid to Petitioner pursuant to a Divorce
Decree, Civil No. XXXXX, entered in the Second Judicial District Court for
Weber County, Utah, on XXXXX.
7.
During XXXXX, Petitioner received payments from the Air Force in the
total amount of $$$$$.
8.
Petitioner was not employed by the Air Force and is not a retired member
of the Air Force.
9.
Petitioner's former spouse is not deceased.
CONCLUSIONS OF
LAW
Utah's Individual Income Tax Act
imposes a tax on the state taxable income of every resident individual. (Utah Code Ann. '59-10-104.)
A Utah resident's "state taxable
income" is the same as the resident's federal taxable income, as modified
by adjustments provided in Utah Code Ann. '59-10-114. (Utah Code Ann. '59-10-112.)
Among the items identified in '59-10-114 to be deducted from federal taxable
income to arrive at state taxable income is:
(d) amounts received by taxpayers
under age 65 as retirement income which, for purposes of this section, means
pensions and annuities, paid from an annuity contract purchased by an employer
under a plan which meets the requirements of Section 404(a)(2), Internal
Revenue Code, or purchased by an employee under a plan which meets the
requirements of Section 408, Internal Revenue Code, or paid by the United
States, a state, or political subdivision thereof, or the District of Columbia,
to the employee involved or the surviving spouse;
The "tax imposing"
provisions of Utah's Sales and Use Tax Act are construed in favor of the
taxpayer. The exemption provisions of
the Act are strictly construed against the taxpayer. Parsons Asphalt Products v. State Tax Commission, 617 P.2d 397,
398 (Utah 1980).
A penalty of 10% of the tax due or
$50, whichever is larger, is imposed for late payment of tax. (Utah Code Ann. '59-1-401.)
For reasonable cause, the Commission
may waive, reduce, or compromise any assessment of penalty or interest. (Utah Code Ann. '59-1-401(8).)
DECISION AND
ORDER
The only issue in this appeal is
whether Ms. XXXXX can deduct income received from the U.S. Air Force from her
state taxable income. The authority
cited for such a deduction is Utah Code Ann. '59-10-114(2), which allows deduction of retirement income from various
specified sources when paid to "the employee or surviving spouse".
A great deal of attention has been
paid to the question of whether Ms. XXXXX' income from the Air Force qualifies
as one of the sources for which a deduction is allowed. Whether or not the payments qualify for the
deduction, '59-10-114(2) imposes a
second requirement: the payments must
be paid to either the employee or the surviving spouse. Ms. XXXXX is clearly neither. Consequently, she may not deduct her
payments from the Air Force from her state taxable income.
With respect to the issue of penalty,
the Commission notes that Ms. XXXXX filed her income tax return on time and
paid all but the disputed amount. Also,
she relied upon advice of her C.P.A. in deducting the Air Force payments from
her state taxable income. Although
mistaken, Ms. XXXXX has clearly acted in good faith. The Commission therefore finds reasonable cause to waive the
$$$$$ penalty in this matter. Interest
is not waived.
In summary, the Commission affirms the
Operations Division's denial of Ms. XXXXX' deduction of income received from
the Air Force, but waives the $$$$$ late payment penalty. It is so ordered.
DATED this 12th day of January, 1994.
BY ORDER OF THE
UTAH STATE TAX COMMISSION.
W. Val Oveson Roger O. Tew
Chairman Commissioner
Joe B. Pacheco Alice Shearer
Commissioner Commissioner
NOTICE: You have twenty (20) days after the date of
the final order to file a request for reconsideration or thirty (30) days after
the date of final order to file in Supreme Court a petition for judicial
review. Utah Code Ann. ''63-46b-13(1), 63-46b-14(3)(a).
^^