James A. Picard - Page 13

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          after the recomputation the taxpayer "was no longer being paid              
          purely on the basis of his disability, but started to receive new           
          and different payments based upon his age and years of service".            
               Wiedmaier v. Commissioner, supra, Mabry v. Commissioner,               
          supra, and the instant case involve substantially similar                   
          arrangements wherein disability retirement payments that are                
          initially excludable under section 104(a)(1) are subsequently               
          recomputed on the date when the disabled employee would have                
          qualified for service retirement if he had continued work                   
          uninterrupted.  The recomputed payments are set at the (reduced)            
          amount that the employee would have received if he had taken                
          service retirement on that date, treating the time actually                 
          working and the time spent on disability as equivalent for this             
          purpose.  We concluded in Wiedmaier and Mabry that the payments             
          resulting from such a recomputation were "determined by reference           
          to the employee's age or length of service" within the meaning of           
          section 1.104-1(b), Income Tax Regs., and our opinion in                    
          Wiedmaier was affirmed by the Court of Appeals for the Sixth                
          Circuit.  Wiedmaier v. Commissioner, 774 F.2d 109 (6th Cir.                 
          1985).  We see no reason for a different result here.                       
               Petitioner argues that Wiedmaier and Mabry are                         
          distinguishable because the taxpayers therein received formal               
          service credit for time spent on disability under the municipal             

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