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from petitioner’s employer were included in petitioner’s income.
Id. Therefore, petitioner is not entitled to exclude the
disability retirement annuity from gross income under section
104(a)(3). Accordingly, we sustain respondent’s determination
that petitioner’s disability retirement annuity received in 1997
is includable in his gross income.
Respondent also contends that petitioner failed to include
in gross income a portion of the Social Security benefits he
received in 1997.
Section 86(a) requires the inclusion of a portion of Social
Security benefits in gross income when the sum of the recipient’s
modified adjusted gross income plus one-half of the Social
Security benefits exceeds certain threshold amounts. In the case
of a single taxpayer, when this sum exceeds $25,000, the lesser
of 50 percent of such excess or 50 percent of the Social Security
benefits received during the taxable year must be included in
gross income. Sec. 86(a)(1), (c)(1)(A). Under section 86,
modified adjusted gross income in general equals adjusted gross
income with adjustments not relevant here. Sec. 86(b)(2).
Petitioner had modified adjusted gross income in 1997 in
excess of $25,000. Therefore, a portion of his Social Security
benefits is taxable. Accordingly, we sustain respondent’s
determination that petitioner’s gross income includes a portion
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