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OPINION
Petitioner argues that the disability benefits that he
received in 1999 are excluded from gross income under section
104(a)(3). Respondent determined that those amounts are not
excluded from gross income.
Gross income includes income from whatever source derived.
Sec. 61(a). However, gross income does not include amounts
received through accident and health insurance for personal
injuries or sickness other than amounts received by an employee,
to the extent such amounts: (1) Are attributable to
contributions by the employer which were not includable in the
gross income of the employee or (2) are paid by the employer.
Sec. 104(a)(3).2
2Sec. 105(a) specifically includes in gross income amounts
received by an employee through accident or health insurance for
personal injuries or sickness to the extent such amounts: (1)
Are attributable to contributions by the employer which were not
includable in the gross income of the employee, or (2) are paid
by the employer. However, sec. 105(b) limits the application of
sec. 105(a) for certain amounts which are paid, directly or
indirectly, to the taxpayer to reimburse the taxpayer for
expenses incurred by him for the medical care of the taxpayer,
his spouse, and his dependents. Further, gross income does not
include disability benefits to the extent that they constitute
payment for the permanent loss or loss of use of a member or
function of the body, or the permanent disfigurement, of the
taxpayer, his spouse, or a dependent, and which are computed with
reference to the nature of the injury without regard to the
period the taxpayer is absent from work. Sec. 105(c). The
exclusions under sec. 105(b) and (c) do not apply to the facts in
the instant case and petitioner has made no argument that they
do.
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Last modified: May 25, 2011