- 9 -
not compute the amount of its payments with reference to the nature
of the injury. Id.
To exclude from income amounts described in section 105(a),
section 105(c) first requires that the taxpayer prove that the
amount received is payment for “the permanent loss or loss of use
of a member or function of the body, or permanent disfigurement, of
the taxpayer”. Sec. 105(c)(1); see also Watts v. United States,
703 F.2d 346, 350-53 (9th Cir. 1983). Next, the taxpayer must show
that the amount received is “computed with reference to the nature
of the injury without regard to the period the employee is absent
from work." Sec. 105(c)(2).
The parties agree that the payments petitioner received from
UNUM in 1997 and 1998 constitute payments for his permanent loss or
use of a member or function of his body within the meaning of
section 105(c)(1). The parties disagree as to whether the payments
were computed with reference to the nature of the injury without
regard to the period petitioner was absent from work as required by
section 105(c)(2).
In the case before us, UNUM agreed to pay the monthly benefit
for the period of disability following a 90-day elimination period.
The UNUM policy provided that petitioner’s monthly disability
benefit would be based on 66-2/3 percent of petitioner’s salary at
the time of the disability up to the maximum $10,000, regardless of
the nature of the injury or illness. Although the amount of the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011