James A. Picard - Page 11

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          recomputed payments were no longer excludable under section                 
          104(a)(1) because they "were computed only with reference to                
          * * * [the taxpayer's] length of service."  Wiedmaier v.                    
          Commissioner, supra.  The Court reasoned:                                   
               Section 104(a)(1) excludes disability payments, not pension            
               payments from income.  Section 1.104-1(b), Income Tax Regs.,           
               acts to prevent pension payments that are disguised as                 
               disability payments from being excluded under section                  
               104(a)(1).  If a retirement provision is meant to compensate           
               employees for their disability and not for their creditable            
               service, then payments are computed with regard to the                 
               injured employee's disability, not with regard to the number           
               of years that the employee has worked for the organization.            
               * * * [Id.]                                                            

               Mabry v. Commissioner, supra, involved payments under the              
          same provisions of the Oakland Charter as are at issue in this              
          case, with one modification noted below.  The taxpayer in Mabry             
          was a member of the Oakland Fire Department retired for an                  
          employment-connected disability on July 1, 1960, prior to                   
          qualifying for service retirement.  Accordingly, pursuant to                
          section 2610(a) of the Oakland Charter, the taxpayer commenced              
          receiving payments on that date equal to 75 percent of 1-year               
          average compensation.  Approximately 3 months later, on September           
          27, 1960, the taxpayer turned 55 and, since he had 22 years of              
          service, became qualified for service retirement,8 treating time            

               8The version of sec. 2610(a) of the Oakland Charter                    
          applicable to the year at issue in this case requires the 75-               
          percent payments to be recomputed on the date when the member               
          "would have completed twenty-five (25) years of service and                 

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