William T. and Kathryn A. Kees - Page 9

                                        - 9 -                                         
          In order to qualify for this exception, the payments to                     
          petitioner must satisfy both conditions.  We find that the                  
          payments fail to satisfy section 105(c)(2); therefore, we need              
          not, and do not, decide whether they satisfy section 105(c)(1).             
               Section 105(c)(2) itself has two parts that must be                    
          satisfied:  The payments to the taxpayer must be computed with              
          reference to the nature of the injury, and they must be computed            
          without regard to the period the taxpayer is absent from work.              
          With respect to the first part, the Court of Appeals for the                
          Fourth Circuit, to which an appeal in this case would lie, has              
          stated as follows:                                                          
                    A review of the cases indicates that for payments to be           
               excludable from income under section 105(c), the instrument            
               or agreement under which the amounts are paid must itself              
               provide specificity as to the permanent loss or injury                 
               suffered and the corresponding amount of payments to be                
               provided. * * * exclusion is permitted only under plans                
               which vary benefits to reflect the particular loss of bodily           
               function. * * *                                                        

          Rosen v. United States, 829 F.2d 506, 509 (4th Cir. 1987).5                 
          There is nothing in the disability plan that computes payments              
          with reference to the nature of the injury.  Indeed, regardless             
          of the injury, a person receiving benefits for total disability             
          under the disability plan gets a monthly payment equal to 60                
          percent of monthly earnings.  Thus, payments under the disability           
          plan are not “computed with reference to the nature of the                  

               5 It may be noted that our own precedent accords with Rosen            
          v. United States, 829 F.2d 506 (4th Cir. 1987).  Hines v.                   
          Commissioner, 72 T.C. 715, 720 (1979).                                      

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  Next

Last modified: May 25, 2011