James A. Picard - Page 12

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          spent on disability as equivalent to time spent working for this            
          purpose.  Pursuant to the terms of section 2610(a) of the                   
          Charter, the taxpayer's disability retirement allowance was then            
          recomputed as if he had taken service retirement on September 27,           
          1960.  As a result, his payments were reduced from 75 percent to            
          50 percent of 1-year average compensation.                                  
               In Mabry, we interpreted section 1.104-1(b), Income Tax                
          Regs., as follows:                                                          
                    In conformity with * * * [section 1.104-1(b), Income              
               Tax Regs.], we and other courts have consistently held that,           
               in order to be excludable under the provisions of section              
               104(a)(1), retirement pensions or payments may not be based            
               upon any factor other than disability and, where payments              
               are based upon any other factor, such as age or length of              
               service on the job, the retirement plan in question will not           
               qualify as similar to workmen's compensation acts within the           
               meaning of section 104.  [Citations omitted.]                          

          Relying on Wiedmaier v. Commissioner, T.C. Memo. 1984-540, we               
          concluded in Mabry v. Commissioner, T.C. Memo. 1985-328, that the           
          recomputed payments were not excludable under section 104(a)(1),            
          based on section 1.104-1(b), Income Tax Regs., reasoning that               

          qualified for service retirement" had such member rendered                  
          service without interruption.  The version of sec. 2610(a) of the           
          Charter applicable in Mabry v. Commissioner, T.C. Memo. 1985-328,           
          required the recomputation when the member (merely) "would have             
          qualified for service retirement".  Consequently, since a member            
          could qualify for service retirement either with 25 years of                
          service or with 20 years if he had attained age 55, the Mabry               
          version of sec. 2610(a) of the Charter resulted in a                        
          recomputation at the 22-year mark when the taxpayer turned 55.              

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