George Kiourtsis - Page 10

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                  Administration.  Otherwise, future members of the armed                                 
                  forces will be allowed to exclude military disability                                   
                  retirement payments from their gross income only if the                                 
                  payments are directly related to "combat injuries."                                     
            Tax Reform Act of 1976, S. Rept. 94-938, at 139, 1976-3 C.B.                                  
            (Vol. 3) 49, 177.                                                                             
                  Contrary to petitioner's argument, that report supports the                             
            interpretation of the statute applied in Haar--that disability                                
            payments may be excluded if the pension plan, whether civilian or                             
            military, compensates for military injuries.  The payments at                                 
            issue here, as in Haar, are based upon a civilian pension                                     
            received by the employee for his inability to do the required                                 
            work, regardless of whether such inability, as pointed out in                                 
            Haar v. Commissioner, 78 T.C. at 867, "arose from military                                    
            service."  Moreover, the report makes clear that Congress was                                 
            attempting to prevent abuse of the exclusion by military retirees                             
            who qualified for disability just before retirement and then                                  
            engaged in full-time civil employment while receiving an                                      
            excludable "disability" paycheck.  S. Rept. 94-938, supra at 138,                             
            1976-3 C.B. (Vol. 3) at 176.  To allow petitioner to exclude from                             
            income disability payments received from a civilian source, thus                              
            in effect setting the stage for being compensated twice for the                               
            same injury, would run counter to the Congressional purpose                                   
            explicitly stated in the committee report upon which petitioner                               

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