110 T.C. No. 9
UNITED STATES TAX COURT
RALPH P. WATERMAN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9201-95. Filed February 9, 1998.
P accepted an offer for an early separation which
had been made to him by the U.S. Navy pursuant to a
downsizing program. At the time of acceptance, P was
in a combat zone and had served over 14 years, the vast
majority of which were not in a combat zone. P would
not have been entitled to a pension until he had served
20 years. The amount of P's severance payment was
calculated on the basis of his length of service. Sec.
112, I.R.C., provides that compensation received for
active service in a combat zone is excludable from
gross income. The regulations under sec. 112 emphasize
that the right to the income must accrue during service
in a combat zone, but the payment may be received after
the combat service. R determined that none of the
payment received by P was excludable under sec. 112.
On brief, R conceded that an apportioned amount of the
severance payment attributable to the time in a combat
zone over total time served would be excludable. P
argues that the entire severance payment is excludable
because his right to the payment arose at the time of
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