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accident or health insurance plan. Petitioner received the
benefits for a disability caused by a severe neurological
impairment, a personal injury or illness, that he suffered
beginning in December 1994. The benefits were attributable to
contributions made by Calera, petitioner’s employer, and the
contributions were not included in petitioner’s gross income.
Thus, in the situation involved herein, all four conditions of
section 105(a) have been met.
Section 105(c), however, excludes from gross income amounts
described in 105(a) if (1) the amounts constitute payment for
permanent loss, or loss of use, of a member or function of the
body, or the permanent disfigurement, of the taxpayer employee, and
(2) the payments are computed with reference to the nature of the
injury and without regard to the period the taxpayer employee is
absent from work.
The legislative history of section 105(c)(2) illustrates the
distinct character of both the nature-of-the-injury and the
absence-from-work requirements of the statute. S. Rept. 1622, 83d
Cong., 2d Sess. 183-184 (1954), provides the following example to
illustrate the kind of payments excludable from gross income under
section 105(c):
Assume that under the plan of an employer payments equal
to 25 percent of annual compensation are made to
employees for loss of a leg. The $10,000 employee would
therefore receive a payment of $2,500 and the $4,000
employee would receive a payment of $1,000. These
amounts would be excludible from gross income if, under
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