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(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 * * * and
(2) are computed with reference to the nature of the
injury without regard to the period the employee is
absent from work.
Each prong of section 105(c) must be satisfied before payments
are excluded. Beisler v. Commissioner, 814 F.2d 1304 (9th Cir.
1987) affg. en banc T.C. Memo. 1985-25.
Neither the statute nor the legislative history precisely
describes the injuries that constitute permanent loss of a
"function of the body". However, section 1.105-3, Income Tax
Regs., provides examples of qualifying injuries:
For purposes of section 105(c), loss or loss of use of a
member or function of the body includes the loss or loss of
use of an appendage of the body, the loss of an eye, the
loss of substantially all of the vision of an eye, and the
loss of substantially all of the hearing in one or both
ears. * * *
Petitioner contends that he has lost the use of his right
ankle and foot based on his inability to run, stand for long
periods of time, walk up or down stairs without difficulty, or
dance. Petitioner testified that his condition is degenerative
with no hope of recovery, and, therefore, qualifies as a
permanent loss of a function of the body. In the alternative,
petitioner contends that his heart condition qualifies as a loss
of a body function in that a valve in his heart is not
functioning properly, thereby compromising his heart muscle.
Petitioner's testimony appears to be in conflict with the 1992
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