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use of an exclusion ratio to except from gross income amounts
proportionate to the taxpayer’s investment in the contract.
Ohio Rev. Code Ann. section 3307.63(A) and (B) (Anderson
2002) provides that STRS disability retirement payments comprise
both an annuity and a pension. STRS calculated the amount
excludable from petitioners’ gross income under section 72(b) to
be $995.40 in each of the years 1999 and 2000. The notice of
deficiency accepts this computation.
B. Section 105
Petitioners seek to obtain a greater exclusion through the
application of section 105. Section 105 addresses the treatment
of amounts received under employer-provided accident and health
insurance.7 Courts have recognized that a plan subject to
6(...continued)
include that part of any amount received as an
annuity under an annuity, endowment, or life
insurance contract which bears the same ratio to
such amount as the investment in the contract (as
of the annuity starting date) bears to the
expected return under the contract (as of such
date).
7 SEC. 105. AMOUNTS RECEIVED UNDER ACCIDENT AND HEALTH PLANS
(a) Amounts Attributable to Employer
Contributions.--Except as otherwise provided in this
section, amounts received by an employee through
accident or health insurance for personal injuries or
sickness shall be included in gross income to the
extent such amounts (1) are attributable to
contributions by the employer which were not includible
in the gross income of the employee, or (2) are paid by
the employer.
(continued...)
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