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benefits exceeds $44,000 must include up to a maximum of 85
percent of their Social Security benefits in their gross income.
See sec. 86(a), (b), and (c).
Respondent determined that 85 percent of the Social Security
benefits petitioner received for 1996 and 85 percent of the
benefits he received for 1997 are includable in his gross income
for each respective tax year. Petitioners do not dispute that 85
percent of the Social Security benefits petitioner received for
each year is taxable, nor do they dispute that petitioner
received worker’s compensation benefits from a private insurer in
the amounts by which his Social Security benefits were offset.
Petitioners, however, argue that the Social Security
Administration never paid the benefits reported as worker’s
compensation offset, and thus those amounts should not be
included in petitioners’ gross income.
Section 86(d)(3) clearly provides that such offsets are
Social Security benefits for purposes of determining gross
income;
if * * * any social security benefit is reduced by
reason of the receipt of a benefit under a workmen’s
compensation act, the term “social security benefit”
includes that portion of such benefit received under
the workmen’s compensation act which equals such
reduction.
Section 86 was added to the Internal Revenue Code by the
Social Security Amendments Act of 1983, Pub. L. 98-21, sec. 121,
97 Stat. 80. The House report states in relevant part:
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Last modified: May 25, 2011