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An exemption "cannot rest upon mere implications." United States
v. Stewart, 311 U.S. 60, 71 (1940); see also United States v.
Wells Fargo Bank, 485 U.S. 351, 355-356 (1988).
Section 104(a)(4) excludes from income "amounts received as
a pension * * * for personal injuries or sickness resulting from
active service in the armed forces". The parties agree that with
respect to the disability compensation received from the DVA,
those payments would be exempt under section 104(a)(4). The SSB
payment, however, was not made for personal injury or sickness.
The payment was made under 10 U.S.C. sec. 1174(c) because of
petitioner's separation from active service prior to normal
retirement, and was based, in part, on his years of active
service. There are two distinct potential sources for the
payment--the SSB payment and the DVA disability compensation.
10 U.S.C. sec. 1174(h)(2) provides, however, that
A member [of the armed forces] who has received
separation pay under this section * * * based on
service in the armed forces shall not be deprived, by
reason of his receipt of such separation pay * * * of
any disability compensation to which he is entitled
under the laws administered by the Department of
Veterans Affairs, but there shall be deducted from that
disability compensation an amount equal to the total
amount of separation pay * * * received. [10 U.S.C.
sec. 1174(h)(2).]
Petitioner does not dispute that normally the SSB payment
would be includable in gross income. See Felman v. Commissioner,
49 T.C. 599 (1968); Woolard v. Commissioner, 47 T.C. 274 (1966).
On the other hand, petitioner argues that since he in effect is
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