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Petitioner concedes that the disability payments are
attributable to insurance premiums which were paid by employers
who contracted for his services through the union and which were
not included in his gross income. However, petitioner contends
that the 1996 payments from the pension trust were disability
payments pursuant to section 105(c), and, therefore, excludable
from gross income.
Section 105(c) provides as follows:
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
taxpayer is absent from work. With respect to the first part of
section 105(c)(2), the Court of Appeals for the Fourth Circuit
stated in Rosen v. United States, 829 F.2d 506, 509 (4th Cir.
1987):
A review of the cases indicates that for payments
to be excludible from income under section 105(c), the
instrument or agreement under which the amounts are
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