William T. and Kathryn A. Kees - Page 10

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          injury”, as required by section 105(c)(2), but instead are                  
          computed with reference to the recipient’s earnings.                        
          Accordingly, the exception does not apply to petitioner,6 and the           
          payments are taxable to him under section 105(a).                           
               Finally, we note that even if petitioners were correct that            
          the lump-sum amount was not paid under the disability plan, they            
          would still be required to include it in income.  At most,                  
          petitioners’ argument that the lump-sum payment was not made                
          under the disability plan amounts to arguing that section 105(a)            
          does not apply.  But if section 105(a) does not apply, then the             
          exclusion under section 105(c) does not apply, and the payments             
          are included in income under section 61, unless specifically                
          excluded by another section.  There are no specific exclusions              
          available to petitioner.  For example, respondent notes, and we             
          agree, that section 104(a)(2) does not apply.  Section 104(a)(2)            
          excludes from income “the amount of any damages received (whether           
          by suit or agreement and whether as lump sums or as periodic                
          payments) on account of personal injuries or sickness”.  Section            
          104(a)(2) applies if the underlying cause of action is based upon           
          tort or tort type rights and the damages were received on account           
          of personal injuries or sickness.  Commissioner v. Schleier, 515            
          U.S. 323, 337 (1995).  In the instant case, there is no evidence            
          that petitioner had any tort or tort type claim against UNUM.               

               6 Because the payments are computed with reference to                  
          earnings, we need not consider whether they are computed without            
          regard to the period of absence from work.                                  

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