Asa Eugene Pearson - Page 5




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          in the gross income of the employee to the extent such amounts              
          are:  (1) Attributable to contributions by the employer which               
          were not includable in the gross income of the employee, or (2)             
          paid by the employer.                                                       
               Petitioner concedes that the disability insurance premiums             
          were paid by General Motors and that he did not include those               
          premiums in his gross income but contends that the 1995 payments            
          from MetLife were disability payments pursuant to section 105(c),           
          and, therefore, excludable from gross income.                               
               Section 105(c) provides as follows:                                    
                    SEC. 105(c).  Payments Unrelated to Absence From                  
               Work.--                                                                
                    Gross income does not include amounts referred to                 
               in subsection (a) to the extent such amounts--                         
                    (1) constitute payment for the permanent loss or                  
                    loss of use of a member or function of the body,                  
                    or the permanent disfigurement, of the taxpayer *                 
                    * *, and                                                          
                    (2) are computed with reference to the nature of                  
                    the injury without regard to the period the                       
                    employee is absent from work.                                     
               In order to qualify for the section 105(c) exception, the              
          payments to petitioner must satisfy both paragraphs (1) and (2)             
          of section 105(c).  Section 105(c)(2) itself has two parts that             
          must be satisfied:  (1) The payments to the taxpayer must be                
          computed with reference to the nature of the injury, and (2) the            
          payments must be computed without regard to the period the                  






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