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112. On brief, respondent conceded that $2,382, the portion of
the separation payment that was measured by time served in a
combat zone, is excludable under section 112.
Discussion
We consider here a matter of first impression involving
whether an early separation payment, the right to which arose and
became fixed while a member of the military was serving in a
combat zone, is excludable from gross income under section 112.
Respondent contends that the portion of the separation payment
apportioned as to time served while petitioner was not in a
combat zone represents compensation that is not excludable under
section 112. Conversely, petitioner contends that the entire
separation payment is excludable from gross income under section
112 as compensation for an act performed and/or a right to
compensation that became fixed while he was in a combat zone. We
hold that no portion of the separation payment would be
excludable from gross income under section 112.2
Section 112 was enacted to provide a tax benefit to members
of the armed services whose lives were placed at risk because of
2 In the notice of deficiency, respondent determined that no
part of the separation payment should be excluded under sec. 112.
On brief, respondent conceded that the portion of the payment
apportioned by reference to the portion of time served in a
combat zone should be excluded from income. Our interpretation
of sec. 112 would not permit any portion to be excluded. Because
of respondent's concession, however, petitioner is entitled to
exclude the $2,382 of the $44,946 severance payment.
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