Ronald A. and Kellie Weigelt - Page 3

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          the Cold War.  In 1980, Ronald A. Weigelt (petitioner) joined the           
          Army and, after completing Officer's Candidate School, was                  
          commissioned an officer in the U.S. Army Reserves.  Petitioner              
          had planned to make the Army a career.  In 1990, the Army began a           
          reduction in force because of the changes in the international              
          situation.  On September 30, 1992, petitioner was honorably                 
          discharged from the Army and received a special separation                  
          benefit (SSB payment) in the amount of $70,070.60.                          
               Prior to his discharge, petitioner applied to the Department           
          of Veterans Affairs (DVA) for a disability pension.  On January             
          11, 1994, the DVA notified petitioner by letter that he was                 
          entitled to monthly disability compensation benefits commencing             
          November 1, 1992, December 1, 1992, and January 1, 1993, in the             
          respective amounts of $83, $85, and $87.  The letter, however,              
          also informed him that                                                      
               You have received a Special Separation Benefit (SSB)                   
               payment of $70,070.60 from the Army.  We must withhold                 
               benefit payments until we recover that full amount.  We                
               will then automatically begin monthly payments.                        
               On their 1992 joint Federal income tax return, petitioners             
          reported the $70,070.60 SSB payment.  Petitioners also claimed a            
          $4,000 deduction for two $2,000 IRA contributions.  Upon                    
          examination, respondent determined that petitioners had                     
          unreported income from wages and interest in the respective                 
          amounts of $153 and $83, and that the deduction claimed for the             
          IRA contributions was not allowable.  While the 1992 return was             

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