Ralph P. Waterman - Page 10

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          Accordingly, the severance payment cannot be considered                     
          compensation for earlier services.  Rather, it must be considered           
          compensation for petitioner's agreeing to early separation from             
          the Navy.  Ultimately, the statute requires that the member's               
          service be performed in a combat zone.                                      
               Respondent argues that the severance payment was received in           
          exchange for the pension petitioner would have received if he had           
          completed 20 years of service.  The parties in this case                    
          stipulated that petitioner accepted the separation offer as part            
          of the Navy's downsizing program, and, as a result, he would not            
          be eligible for a pension after 20 years of service.                        
          Accordingly, respondent's argument that the severance payment was           
          received in exchange for pension benefits is a matter of                    
          conjecture.  On the basis of the parties' stipulation, petitioner           
          was not entitled to a pension at the time he accepted the early             
          separation.  Petitioner had served just over 14 years and was               
          almost 6 years short of having "vested" pension benefits.  It is            
          true that as a result of petitioner's agreeing to sever his                 
          relationship with the military, he would not be able to serve               
          long enough to be entitled to a pension.  That is a far cry from            
          exchanging his pension for a severance payment.  The only                   
          similarity between a pension (which by statute is not exempt                
          under section 112) and a severance payment is that both are                 
          calculated by means of length of service.  There is no evidence             





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