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required to repay that amount from the nontaxable DVA disability
compensation, the SSB payment should also be treated as
nontaxable.
This same issue was before the Court in Berger v.
Commissioner, 76 T.C. 687 (1981). Berger involved 10 U.S.C. sec.
687, Pub. L. 89-718, sec. 6, 80 Stat. 1115, 1116 (1966) (repealed
by Pub. L. 96-513, sec. 109(a), 94 Stat. 2870 (1980)). That
section provided that a member of the reserves who was
involuntarily released from active duty was entitled to
readjustment pay based on his years of service. If, however, the
member was entitled under repealed 10 U.S.C. sec. 687(b)(6) to
disability compensation from the DVA (then known as the Veteran's
Administration), an "amount equal to 75 percent of the
readjustment payment is deducted from the disability
compensation." In Berger, as here, the taxpayer argued that the
readjustment pay he received should be reclassified as disability
compensation excludable from income under section 104(a)(4).
Berger v. Commissioner, supra at 689. In rejecting that
argument, the Court noted that
The legislative history reveals the congressional
awareness of the plight of servicemen who have been
involuntarily released from active duty, and, who
* * * are immediately entitled to both a lump-sum
readjustment payment and disability compensation.
* * * Congress provided that these veterans would
receive readjustment pay and that upon subsequent
confirmation of entitlement to disability compensation,
the readjustment pay in essence would be repaid to the
Government by a deduction from the disability
compensation * * *
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