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conceded that the section 104(a)(1) exclusion covers the payments
received by petitioner from the time he was retired for
disability until October 31, 1991, the date the payments were
recomputed pursuant to the provisions of the Oakland Charter.
Respondent contends, however, that the recomputed payments
received after October 31, 1991, are not excludable under section
104(a)(1) by virtue of the exception to the applicability of that
section provided in section 1.104-1(b), Income Tax Regs., for "a
retirement pension or annuity to the extent that it is determined
by reference to the employee's * * * length of service".
Therefore, we must decide whether the "length of service" proviso
in the regulations precludes exclusion under the circumstances
presented in this case, where disability payments initially
excludable under section 104(a)(1) are subsequently recomputed,
as of the date when petitioner would have qualified for service
retirement if he had continued work uninterrupted, and as so
recomputed the payments approximate the service retirement
benefit that petitioner would have received if he had in fact
continued working until that date.7
7We note that petitioner has not challenged the validity of
sec. 1.104-1(b), Income Tax Regs. This Court has previously
upheld the validity of the regulation in Wiedmaier v.
Commissioner, T.C. Memo. 1984-540, and was expressly affirmed in
that regard in Wiedmaier v. Commissioner, 774 F.2d 109 (6th Cir.
1985).
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