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and an $8.50 Medicare premium was paid on her behalf. During
1997, petitioner also received workers' compensation payments
totaling $15,396.73.
On their 1997 tax return, petitioners reported $184 ($5,724,
rounded amount, minus the workers’ compensation offset of $5,540)
as the amount of benefits they received from Social Security.
They reported $156 as the amount of Social Security benefits
includable in their gross income.
Respondent determined that petitioners failed to report
$5,540 of Social Security benefits and that 85 percent of that
amount, or $4,709, is includable in their gross income.
Petitioners claim that because both workers' compensation and
Social Security benefits were reduced using the same offset,
petitioner did not actually receive the $5,540 from anyone.
Accordingly, petitioners contend that the $5,540 should not be
included as part of petitioner’s Social Security benefits.
Social Security benefits are generally included in income as
provided by section 86. Workers' compensation benefits are
generally not included in income under section 104(a)(1). When
an individual receives both Social Security benefits and workers’
compensation benefits in the same year on account of the same
injury, the Social Security benefits paid to the individual are
generally reduced by a portion of the workers’ compensation
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Last modified: May 25, 2011