James A. Picard - Page 8

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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.            

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