Anthony M. and Sandra L. Flores - Page 6

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          benefit.  Sec. 86(d)(3).3  See Mikalonis v. Commissioner, T.C.              
          Memo. 2000-281; Willis v. Commissioner, T.C. Memo. 1997-290.  The           
          rationale for this provision appears in the legislative history             
          accompanying that enactment of section 86 by the Social Security            
          Amendments Act of 1983, Pub. L. 98-21, sec. 121, 97 Stat. 80:               
                    Your Committee’s bill provides that social                        
               security benefits potentially subject to tax will                      
               include any workmen’s compensation whose receipt caused                
               a reduction in social security disability benefits.                    
               For example, if an individual were entitled to $10,000                 
               of social security disability benefits but received                    
               only $6,000 because of the receipt of $4,000 of                        
               workmen’s compensation benefits, then for purposes of                  
               the provisions taxing social security benefits, the                    
               individual will be considered to have received $10,000                 
               of social security benefits. [H. Rept. 98-25, at 26                    
               (1983).]                                                               
          In other words, the purpose of section 86(d)(3) is to equalize              

               3    Sec. 86(d)(3) provides as follows:                                
               SEC. 86(d). Social Security Benefit.--                                 
                        *     *     *     *     *     *     *                         
                    (3) Workmen’s compensation benefits                               
               substituted for social security benefits.–-For purposes                
               of this section, if, by reason of section 224 of the                   
               Social Security Act * * *, any social security benefit                 
               is reduced by reason of the receipt of a benefit under                 
               a workmen’s compensation act, the term “social security                
               benefit” includes that portion of such benefit received                
               under the workmen’s compensation act which equals such                 
               reduction.                                                             
               At trial, Mrs. Flores testified that she received workmen’s            
          compensation in an amount greater than the $11,855 “offset” that            
          was identified in her 2002 Form 1099-SSA, described supra p.3.              
          In this regard, we emphasize that sec. 86(d)(3) serves to treat             
          workers’ compensation benefits as though they were Social                   
          Security benefits only to the extent of the offset amount.                  





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