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to the extent such amounts are attributable to employer
contributions that were not includable in the employee's gross
income. Section 105(e) provides that amounts received by an
employee from employer accident or health plans shall, for
purposes of sections 104 and 105, be treated as amounts received
from accident or health insurance.
Section 105(c) provides an exception to the general rule
contained in section 105(a):
(c) Payments Unrelated to Absence From Work.--
Gross income does not include amounts referred to in
subsection (a) to the extent such amounts--
(1) 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
(as defined in section 152), and
(2) are computed with reference to the
nature of the injury without regard to the
period the employee is absent from work.
Thus, among other requirements, in order for the plan
distributions to be excluded from gross income, the payments must
have been computed with reference to the nature of petitioner's
injuries without regard to the period petitioner was absent from
work.
B. Case Law
In Hines v. Commissioner, 72 T.C. 715 (1979), we were
concerned with an airline pilot who had suffered a heart attack
that, under both the rules of his employer and regulations
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