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(9th Cir. 1981). In these cases, we held that a VA disability
determination does not prove that a portion of a pension is
received for injuries sustained during active service. Moreover,
the VA percentage of disability determination and petitioner's
subsequent election have already resulted in a specific benefit
which was excluded from petitioners' income.
Petitioners cited McNair v. Commissioner, 250 F.2d 147 (4th
Cir. 1957), revg. 26 T.C. 1221 (1956), and Prince v. United
States, 127 Ct. Cl. 612, 119 F. Supp. 421 (1954). Both cases
involved veterans who retired from active duty and received
service pensions. However, those veterans were then recalled to
active duty and subsequently found to be incapable of remaining
on active duty due to service-connected injuries. In the instant
case, petitioner was not recalled to active duty after his
retirement, nor was he ever found to be incapable of remaining on
active duty due to his injuries. Therefore, these cases are not
controlling.
Petitioners also relied on Rev. Rul. 78-161, 1978-1 C.B. 31,
and the "Sergeant Jones" example from an outdated IRS Publication
17 as authority for their treatment of the service pension
income. Rev. Rul. 78-161 is inapplicable on its face since it
relates to a retroactive VA disability rating, which is not
involved in the present case. Rather, petitioners are trying to
exclude an amount in excess of the amount allowed by the VA.
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