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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
relies.
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