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Disability benefits are excludable from gross income under
section 104(a)(3)3 or section 105(c)4 if certain requirements are
met. However, as discussed next, we conclude that those
requirements are not met.
3 SEC. 104. COMPENSATION FOR INJURIES OR SICKNESS.
(a) In General.–- * * * gross income does not
include--
* * * * * * *
(3) amounts received through accident or
health insurance * * * for personal injuries or
sickness (other than amounts received by an
employee, to the extent such amounts (A) are
attributable to contributions by the employer
which were not includible in the gross income of
the employee, or (B) are paid by the employer);
4 Sec. 105(c) provides in part:
SEC. 105. AMOUNTS RECEIVED UNDER ACCIDENT AND HEALTH
PLANS.
(c) Payments Unrelated to Absence From Work.--
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, his spouse, or a dependent (as defined
in section 152), and
(2) are computed with reference to the nature
of the injury without regard to the period the
employee is absent from work.
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