James K. and Patricia J. Goodchild - Page 6




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          employee has to be absent from work.  Such payments are promptly            
          discontinued if and when an employee becomes able to work again.            
          The disability payments from the Minnesota State Retirement                 
          System are computed with regard to the period the employee was              
          absent from work.  The critical requirement for exclusion under             
          section 105(c) that the payments must be “computed * * * without            
          regard to the period the employee is absent from work” is not               
          satisfied.  Armstrong v. Commissioner, supra.                               
               Section 105(c) does not apply in this case.  The payments              
          from the Minnesota State Retirement System are taxable under                
          section 61(a)(11).  The payments from the Social Security                   
          Administration are taxable under section 86.  We sustain                    
          respondent’s determination.                                                 
               Reviewed and adopted as the report of the Small Tax Case               
          Division.                                                                   


                                                  Decision will be entered            
                                             for respondent.                          

















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