Stephen Hayden - Page 8

                                        - 8 -                                         
               the plan, they are payable regardless of the period that               
               the employee is absent from work.                                      
               In Beisler v. Commissioner, 814 F.2d 1304, 1308 (9th Cir.              
          1987), affg. T.C. Memo. 1985-25, the U.S. Court of Appeals for the          
          Ninth Circuit, to which an appeal of a decision in this case would          
          lie, described the exception provided in section 105(c) and its             
          purpose as follows:                                                         
               Section 105(c) * * * [excludes] from gross income certain              
               payments under accident and health plans that do not                   
               resemble income, while including those that do. Section                
               105(c)(2) is a mechanism for accomplishing this purpose.               
               It excludes from gross income only those amounts of                    
               accident and health insurance payments that are computed               
               with reference to the nature of the taxpayer's injury.                 
               Only these payments are compensation for "the permanent                
               loss or loss of use of a member or function of the body,               
               or permanent disfigurement," and as such do not resemble               
               income.  On the other hand, section 105(c)(2) includes in              
               income amounts that vary according to the amount of time               
               an employee is absent from work.  These amounts resemble               
               income in that they tend to compensate a person for lost               
               wages.                                                                 
                    To accomplish the congressional purpose of excluding              
               only those payments that compensate for permanent losses               
               of bodily function, the nature-of-the-injury requirement               
               is best read to require that benefits vary according to                
               the type and severity of a person's injury.  Only then                 
               are the payments and the injury sufficiently related to                
               reflect the compensatory purpose required by section                   
               105(c). * * *                                                          
          Thus, “amounts received as accident or health insurance benefits            
          may be excluded from gross income under section 105(c) only if paid         
          by a plan that varies the amount of payment according to the type           
          and severity of the injury suffered by the employee.”  Id.                  
          Benefits are not excludable under section 105(c) if the plan does           






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  Next

Last modified: May 25, 2011