78 T.C. 86">*86 Respondent determined a deficiency in petitioners' Federal 1982 U.S. Tax Ct. LEXIS 149">*152 income tax for the year 1976 in the amount of $ 549 and an addition to tax under section 6651(a) ¹ in the amount of $ 22. Petitioners concede that respondent properly made an adjustment entitled "Taxes -- State and Sales" in the amount of $ 133 in the notice of deficiency issued to them. Petitioners have amended their petition, by asserting that they incorrectly reported as income certain amounts: $ 161.19 received from U.S. Steel Corp. and $ 133.21 received from Bethlehem Steel. Respondent has conceded that the $ 161.19 should not have been reported as taxable income. Therefore, the issues remaining for our decision are: (1) Whether petitioners are entitled to a deduction in the amount of $ 1,500 for a contribution to an individual retirement account (IRA), under 78 T.C. 86">*87 section 219; (2) whether interest income credited to such IRA must be included in petitioners' gross income; (3) whether petitioners are entitled to exclude the amount of $ 133.21 received from Bethlehem Steel from taxable income; and (4) whether petitioners are liable for the addition to tax, under section 6651(a).

1982 U.S. Tax Ct. LEXIS 149">*153 FINDINGS OF FACT

Some of the facts have been stipulated. The stipulation of facts and the exhibits attached thereto are incorporated herein by this reference.

Petitioners Albert and Virginia R. Horvath, husband and wife, filed a joint Federal income tax return for the year 1976 with the Internal Revenue Service Center at Fresno, Calif. Petitioners resided in Alamo, Calif., at the time their petition herein was filed.

Petitioner Virginia R. Horvath (Mrs. Horvath) was employed by U.S. Steel Corp. from June 1975 until sometime in October 1976, when she terminated her employment there. As an employee of U.S. Steel Corp., beginning on January 1, 1976, Mrs. Horvath was a participant under the U.S. Steel and Carnegie Pension Fund (the pension fund), due to her mandatory contributions of $ 161.19 to the pension fund. Such pension fund is stipulated to be a plan of the type described in section 219(b)(2)(A)(i).

The parties have submitted a copy of a booklet containing the provisions of the pension fund as it operated in 1976 (the 1976 rules). Section 1.1(k)(iv) of the 1976 rules defines the term "Benefit Compensation" for the period during which an employee was a participant under the1982 U.S. Tax Ct. LEXIS 149">*154 1976 rules as his total compensation. Participants in the pension fund accrue benefits ² based upon their total benefit compensation.

Under the 1976 rules, Mrs. Horvath was entitled to elect to 78 T.C. 86">*88 receive upon termination of her employment either a deferred pension ³ or a refund of her contributions and interest accrued on her contributions to the date of her break in service. Section 7.2 of the 1976 rules provides that any former employee who elected to receive a refund of his contributions and interest accrued thereon, rather than a deferred pension, and is reemployed 1982 U.S. Tax Ct. LEXIS 149">*155 in a group designated as covered by the 1976 rules may choose to repay within 2 years of his reemployment the amount distributed to him plus interest on such amount computed at the statutory rate at the date of his reemployment, compounded annually from the date of distribution to the date of repayment. Upon making such repayment, the employee becomes entitled to receive credit for benefit compensation previously credited to his account for the purpose of determining future benefits under the 1976 rules.

When Mrs. Horvath terminated her employment with U.S. Steel Corp., she elected to receive a refund1982 U.S. Tax Ct. LEXIS 149">*156 of the $ 161.19 which she had contributed to the pension fund. As a result, she thereafter was no longer covered by the pension fund.

Mrs. Horvath's gross income as an employee of U.S. Steel Corp. in 1976 was $ 12,318.50.

On October 4, 1976, Mrs. Horvath commenced employment with EG & G Inc. On that same day she became a participant under the EG & G, Inc., Employees Retirement Plan (the EG & G plan), which is a mandatory pension plan, as a result of EG & G, Inc.'s obligation to contribute to or under the plan on her behalf. Such retirement plan has been stipulated to be a plan of the type described in section 219(b)(2)(A)(i), subject to petitioners' contention that, based upon this Court's holding in Caterpillar Tractor Co. v. Commissioner, 72 T.C. 1088">72 T.C. 1088 (1979), the plan is discriminatory. Mrs. Horvath continued to be employed by EG & G, Inc., and to be covered by the EG & G plan, at least until the time of trial of the instant case.

In November 1976, Mrs. Horvath established an IRA and made a contribution to it in the amount of $ 1,500. On their 1976 Federal income tax return, petitioners claimed a deduction 78 T.C. 86">*89 for such contribution. Respondent1982 U.S. Tax Ct. LEXIS 149">*157 disallowed the deduction. In addition, respondent determined that since the deduction had been disallowed, interest income credited to the IRA should have been included by petitioners in taxable income. ⁴

On their 1976 tax return, petitioners reported as taxable income received from Bethlehem Steel the amount of $ 133.21.

Petitioners' 1976 income tax return indicates that it was executed by them on April 3, 1977. On such return, petitioners claimed they were due a refund of $ 115.

Respondent introduced into evidence a copy of an envelope addressed to the Internal Revenue Service Center at Fresno, Calif., bearing petitioners' return address and a postmark dated April 23, 1977. The only mail that petitioners send to the Internal Revenue Service each year is their Form 1040.

In his notice of deficiency, 1982 U.S. Tax Ct. LEXIS 149">*158 respondent determined that petitioners failed to timely file their return and therefore added 5 percent of the tax due to petitioners' tax, pursuant to section 6651(a).

OPINION

Respondent asserts that, in 1976, Mrs. Horvath was an active participant in a plan described in section 401 and was, therefore, not entitled to a deduction for amounts paid to an IRA, under section 219.

In general, section 219(a) allows a deduction for cash contributions made to an IRA. Section 219(b)(2)(A)(i), however, disallows that deduction, in the case of an individual, for a taxable year in which he was an active participant in a plan described in section 401(a) for any part of the year. An individual is an active participant in a plan if he is accruing benefits under the plan, even though he has only forfeitable rights to those benefits. Orzechowski v. Commissioner, 69 T.C. 750">69 T.C. 750, 69 T.C. 750">753 (1978), affd. 592 F.2d 677">592 F.2d 677 (2d Cir. 1979). ⁵

1982 U.S. Tax Ct. LEXIS 149">*159 78 T.C. 86">*90 The parties have stipulated that Mrs. Horvath was a participant in a qualified plan, the pension fund, for a part of 1976. As noted in note 2, the 1976 rules provide that no participant in the pension fund shall have an accrued benefit until he has at least 1 year of continuous service. Petitioners have introduced no evidence to show whether or not Mrs. Horvath had the required year of continuous service. Accordingly, since petitioners bear the burden of proof, we must presume that she was accruing benefits while a participant. Welch v. Helvering, 290 U.S. 111">290 U.S. 111 (1933); Rule 142, Tax Court Rules of Practice and Procedure.⁶1982 U.S. Tax Ct. LEXIS 149">*160 Consequently, as respondent contends, in principle Mrs. Horvath's situation is indistinguishable from the circumstances of the taxpayers in a large number of cases following the Orzechowski case ⁷ and respondent's determination on the deductibility issue should be sustained.

We have considered the recent opinion in Foulkes v. Commissioner, 638 F.2d 1105">638 F.2d 1105 (7th Cir. 1981), and we do not think it is of any help to petitioners in this case. In the Foulkes case, the taxpayer, in May 1975, terminated his employment, thereby forfeiting his rights to benefits under a qualified noncontributory pension plan of his employer. Moreover, the Commissioner had conceded that the break-in-service rules of section 411(a)(6) did not apply to the petitioner. Under those rules, if an employee who is covered by a qualified plan has a break in service and later returns to work for the same employer, his past service is not disregarded, provided certain1982 U.S. Tax Ct. LEXIS 149">*161 time requirements are satisfied. Thus, the Court of Appeals, in holding the taxpayer was entitled to a deduction for a contribution to an IRA, emphasized that, at the end of his taxable year, he had no potential for a double tax benefit.

78 T.C. 86">*91 In the instant case, Mrs. Horvath would be entitled to a reinstatement of previously credited benefit compensation, which is determinative of the amount of accrued benefits under the pension fund, if she were to resume employment in a group covered by the 1976 rules and repay the full amount distributed to her plus interest thereon within 2 years of such reemployment. ⁸1982 U.S. Tax Ct. LEXIS 149">*162 Therefore, the potential for a double tax benefit did in fact exist as of the end of 1976 and, consequently, the rationale adopted by the Court of Appeals in the Foulkes case is not applicable. See Chapman v. Commissioner, 77 T.C. 477">77 T.C. 477 (1981); Johnson v. Commissioner, 661 F.2d 53">661 F.2d 53 (5th Cir. 1981), affg. 74 T.C. 1057">74 T.C. 1057 (1980). ⁹

As previously noted, respondent included the interest income credited to the IRA during 1976 in petitioners' taxable income, based upon his disallowance of the deduction for the contribution to the IRA. ¹⁰

1982 U.S. Tax Ct. LEXIS 149">*163 Although section 219(b)(2)(A)(i) does preclude the deductibility of a contribution made by an individual to an IRA for a year in which he was an active participant in a qualified pension plan, it by no means renders the IRA, to which such contribution was made, invalid. 69 T.C. 750">Orzechowski v. Commissioner, supra at 754-757. ¹¹Section 408(e)(1) provides that any IRA is exempt from Federal income tax, with specified exceptions. The making of nondeductible contributions to an IRA is not among the specified exceptions to the general rule of section 408(e)(1). Section 408(e); 69 T.C. 750">Orzechowski v. Commissioner, supra at 755. By virtue of section 408(d), income credited to a valid IRA is generally taxed when it is distributed, and petitioners should keep this in mind. That section provides that, other 78 T.C. 86">*92 than in certain circumstances, any amount distributed from an IRA shall be included in the distributee's gross income in the taxable year in which it is received by the distributee.

1982 U.S. Tax Ct. LEXIS 149">*164 In accordance with the foregoing, we conclude that petitioners are not required to include the income credited to the IRA in their 1976 gross income. ¹²

Petitioners contend that they incorrectly reported as taxable income the amount of $ 133.21, received from Bethlehem Steel, on the ground that such amount represents a refund of contributions made by Mrs. Horvath to Bethlehem Steel's pension plan. Petitioners have presented no evidence to satisfy their burden of proof1982 U.S. Tax Ct. LEXIS 149">*165 on this issue. Rule 142(a), Tax Court Rules of Practice and Procedure. We, therefore, are unable to find that the $ 133.21 was not includable in their gross income.

Petitioners claim that their return was timely filed and that they, therefore, are not liable for an addition to tax under section 6651(a). They point out that since the return was signed on April 3, 1977, and they were filing for a refund, there was no reason why they would have filed late. Petitioners do not deny that respondent has produced a correct copy of the envelope in which their return was mailed. Instead, they claim that the fact that the postmark on such copy bears a date of April 23, 1977, must be due to improper handling by the Postal Service.

As a general rule, individual income tax returns made on the basis of a calendar year are, of course, required to be filed by the 15th day of April following the close of the calendar year. Sec. 6072. There is no evidence in the record as to when the tax return was, in fact, delivered to respondent. However, it is undisputed that the envelope in which the return was mailed bears a U.S. Postal Service postmark of April 23, 1977, and presumably the return was 1982 U.S. Tax Ct. LEXIS 149">*166 delivered thereafter. Petitioners do not contend that section 7502 applies, nor could they make such a contention since the postmark is dated beyond 78 T.C. 86">*93 the date prescribed for filing the return. Sec. 7502(a)(2). Respondent has determined that the late filing addition is applicable here, and petitioners have the burden of proof to establish that their return was timely filed. Fischer v. Commissioner, 50 T.C. 164">50 T.C. 164, 50 T.C. 164">177 (1968). They have not sustained their burden.

We, therefore, sustain respondent's determination that petitioners are liable for the 5-percent addition to tax pursuant to section 6651(a).

Decision will be entered under Rule 155.