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disability is formally designated as "service" under the
applicable workmen's compensation statute. As was the case in
Wiedmaier v. Commissioner, T.C. Memo. 1984-540, and Mabry v.
Commissioner, supra, the recomputation of petitioner's disability
retirement payments was a direct function of his date of hire.
We believe this feature is sufficiently connected to the concept
of "length of service" to bring the recomputed payments within
the proscription of section 1.104-1(b), Income Tax Regs., for
pensions "determined by reference to * * * length of service".
This interpretation is reinforced by the fact that the purpose of
the recomputation was to make petitioner's disability payments
approximate the pension payments provided to other employees
based on years of actual service. "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)."
Wiedmaier v. Commissioner, supra. Our conclusion is consistent
with the Court's prior holdings in Mabry and Wiedmaier. This
result also comports with the general rule that "Exemptions as
well as deductions are matters of legislative grace, and a
taxpayer seeking either must show that he comes squarely within
the terms of the law conferring the benefit sought." Newhall
Unitrust v. Commissioner, 104 T.C. 236, 247 (1995) (quoting
Nelson v. Commissioner, 30 T.C. 1151, 1154 (1958)). Accordingly,
the payments to petitioner during the year at issue were
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