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in 1993, Brooks had attained the rank of sergeant. McMahon
retired in 1990 having attained the rank of captain.
Petitioners were eligible for retirement under the City
disability pension plan (plan). Under the plan employees were
paid at the rate of 50 percent of their salary if the employee
was below the age of 55. Pursuant to State law, however, the
City was required to settle police employment disputes by binding
arbitration. In 1989 the City entered into a collective
bargaining agreement (agreement) with the Union to provide
increased benefits to police officers.
In accordance with the provisions of the agreement,
petitioners received annual disability pension payments equal to
60 percent of their annual salary at the time of their
retirement.
Brooks for the year 1993 and McMahon for the year 1992 did
not report on their Federal income tax returns any of the
disability-pension payments they received from the City.
OPINION
Respondent contends that petitioners may not exclude from
gross income amounts they received as disability payments because
the City ordinance implementing the plan is neither a workers'
compensation act nor in the nature of a workers' compensation act
as required by statute. The ordinance does not meet statutory
requirements, according to respondent, because the wording of the
ordinance does not specifically limit benefits to those who are
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