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For disability benefits to qualify for exclusion under
section 105(c), three requirements must be met. See Beisler v.
Commissioner, 814 F.2d 1304, 1306-1308 (9th Cir. 1987), affg. en
banc T.C. Memo. 1985-25. We address only one--whether the
payments are computed with reference to the nature of the injury.
See sec. 105(c). This requirement is satisfied only if benefits
under the plan vary according to the type and severity of the
injury. See Beisler v. Commissioner, supra; Rosen v.
Commissioner, 829 F.2d 506, 510 (4th Cir. 1987); Hines v.
Commissioner, 72 T.C. 715, 720 (1979).
Although petitioner unquestionably suffered from serious
medical ailments in 1994 and thereafter, the record does not
support a finding that the disability benefits received by
petitioner were calculated with reference to the type and
severity of the injury suffered. Rather, the evidence is clear
that the disability benefits were calculated with reference to
the petitioner's salary and his years of service with the City
and did not vary depending on the injury or illness suffered.
Because petitioner's disability benefits were not calculated
with reference to the nature of petitioner's injury as required
by section 105(c)(2), petitioner's disability benefits do not
fall within the section 105(c) exception. Accordingly, we
conclude that the short-term and long-term disability benefits
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