Blaney H. Howle III and Polly T. Howle - Page 10




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          an accident or health benefit is attributable to the                        
          contributions of the employee, then that portion of the benefit             
          is excludable from gross income under section 104(a)(3).  See               
          sec. 1.72-15(c)(1), Income Tax Regs.  If, however, the plan does            
          not expressly provide that the accident or health benefits are to           
          be provided with employee contributions and the portion of                  
          employee contributions to be used for such purpose, it will be              
          presumed that none of the employee contributions is used to                 
          provide such benefits.  See sec. 1.72-15(c)(2), Income Tax Regs.            
               Absent disability, no railroad retirement benefits are paid            
          until the employee reaches age 62 or is at least 60 years old and           
          has completed 30 years of service.  See Railroad Retirement Act             
          of 1974, Pub. L. 93-445, sec. 2(a)(10), 88 Stat. 1312, currently            
          codified at 45 U.S.C. sec. 231(a)(1) (1994).  Petitioners have              
          not presented any evidence regarding Mr. Howle’s length of                  
          service.   We thus conclude that Mr. Howle was not eligible for             
          retirement until he turned 62 on October 31, 1997, and that the             
          railroad retirement benefits petitioners received in 1997 were on           
          account of disability until such date.                                      
               We have found no provision in the Railroad Retirement Act              
          expressly stating that disability benefits are to be provided               
          with employee contributions.  See 45 U.S.C. 231.  Therefore, all            
          of the Tier 2 benefits received by petitioners through                      
          October 31, 1997, are to be included in gross income.                       






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