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Petitioners did not report any of these disability payments
on their return for 1987, 1988, 1989, or 1990. Respondent
determined that the payments received by petitioner under the
Monarch policy and the Provident policy were includable in
income.
Discussion
We must decide whether petitioner, who suffers from a
debilitating physical condition, is eligible for the tax benefit
Congress intended to confer upon those whose quality of life has
been significantly lessened by a severe and permanent physical
injury. Petitioner contends that the disability payments at
issue are excludable from his gross income because: (1) They
constituted payment for the permanent loss or loss of use of a
member or function of the body, in that petitioner has
permanently lost the use of the function of his hands, feet, and
legs; and, (2) the payments were computed with reference to the
nature of the injury without regard to the period petitioner was
absent from work. Respondent, in contrast, argues the payments
received by petitioner under the Monarch policy do not satisfy
either of the conditions imposed by section 105(c); that the
payments received under the Provident policy do not satisfy the
first condition of section 105(c); and that the payments under
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