Dale J. and Phillis L. De Both - Page 3




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               Respondent determined a deficiency in petitioners' 1997                
          Federal income tax in the amount of $1,316.  This Court must                
          decide whether petitioners must include a workers’ compensation             
          offset of $5,540.40 as part of their Social Security benefits.              
               Some of the facts in this case have been stipulated and are            
          so found.  Petitioners resided in Cottage Grove, Minnesota, at              
          the time they filed their petition.                                         
               In September 1994, Phillis De Both (petitioner) was injured            
          in a workplace accident.  Both of petitioner's arms were severed,           
          and she suffered other serious injuries.                                    
               Petitioner received workers' compensation benefits under               
          Minnesota law for her injuries.  She also received Social                   
          Security benefits under Federal law for her injuries.                       
               CompCost, Inc. (CompCost), a State Fund Mutual Company,                
          handles the Minnesota workers’ compensation claims of petitioner.           
          On February 23, 1999, CompCost advised that the $25,000 threshold           
          under Minnesota law was met on May 2, 1996, and since that date             
          CompCost has been taking a Social Security offset against                   
          petitioner’s workers’ compensation benefit.                                 
               The Social Security Administration filed a Form 1099 with              
          respondent which indicated that in 1997 petitioner received total           
          benefits of $5,723.90.  Of that amount, $5,540 was not paid to              
          petitioner, but was a "Worker's compensation offset".  In 1997,             
          petitioner received payments totaling $175 from Social Security,            





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