96-2146

Income Tax

Signed 3/4/97

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

PETITIONER, :

:

Petitioner, : ORDER

:

v. : Appeal No. 96-2146

:

AUDITING DIVISION OF THE : Account No. #####

UTAH STATE TAX COMMISSION, :

:

Respondent. : Tax Type: Income Tax

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for an Initial Hearing pursuant to the provisions of Utah Code Ann. §59-1-502.5, on January 9, 1997. Gail S. Reich, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was PETITIONER. Present and representing Respondent were Dan Engh and Frank Hales of the Auditing Division.

This appeal involves retirement income for 1993 and 1994. For 1993 $$$$$ of additional tax was due and owing with $$$$$ of interest having accrued. For 1994 $$$$$ of additional tax was due and owing with $$$$$ of interest having accrued. No penalties were imposed. Petitioner asserts entitlement to $$$$$ retirement deduction available to taxpayers under the age of 65.

APPLICABLE LAW

Utah Code Annotated §59-10-114(2) states:

“There shall be subtracted from federal taxable

income of a resident or non-resident individual:

. . .(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 paid

by employee under a plan which meets the require-

ments 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.”

Utah Tax Commission Rule R865-9I-38(A) provides:

“A. Amounts received by taxpayers from pension

or annuity plans described in Section 59-10-114

are not retirement income for purposes of that

section if:

(3) The amounts received are due to termination

of employment before reaching a normal retirement

age as established under the qualifying plan.”

DECISION AND ORDER

Utah Tax Commission Rule provides that the subtraction from federal taxable income set forth in UCA §59-10-114(2) is not available if the amounts received on the pension or annuity are due to termination of employment before reaching normal retirement age. Petitioner was 49 and 50 during the relevant years. The IRS publication dealing with a disability retirement indicates that the disability pension received by Petitioner was taxable at the federal level as wages until reaching minimum retirement age at which time the payments are treated as retirement annuity. Under Civil Service Retirement System, the minimum combination of age and service for retirement are generally age 55 with 30 years of service, age 60 with 20 years of service or age 62 with five years of service. Petitioner clearly fell below the normal, or minimum retirement age established under the qualifying plan. Based upon the information presented at the hearing, and the records of the Tax Commission, the Commission finds the disability pension was received due to termination of employment before reaching a normal retirement age and Petitioner is not entitled to the benefit of the deduction from federal taxable income for the disability pension received during the years in issue.

This decision does not limit a party's right to a Formal Hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further administrative action or appeal rights in this matter.

DATED this 4 day of MARCH, 1997.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Richard B. McKeown

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner

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