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Petitioner also contends that regardless of whether U.S.
Airways in fact funded the disability plan, any contributions
that U.S. Airways made to the plan “would be constructive income
to the Petitioner, and thus includible in the Petitioner’s gross
income for each year the contributions were made.” However, as a
general matter, the gross income of an employee does not include
employer-provided coverage under an accident or health plan.
Sec. 106(a). Thus, we cannot agree that any contributions that
U.S. Airways made to the disability plan were properly includable
in petitioner’s gross income.
The benefits that petitioner received in 1999 are not
excludable under section 104(a)(3).3 Accordingly, we hold that
the payment received in 1999 constitutes gross income, and we
sustain respondent’s determination of a deficiency.
Decision will be entered
for respondent except for the
accuracy-related penalty under
section 6662(a).
3Petitioner also argues that the “US Air, Inc. Pilot’s
Working Agreement” must be construed in conformance with the laws
of the Commonwealth of Pennsylvania, which prohibit taxation on
disability payments because they are not considered to be the
property of the beneficiary. This case raises a question
regarding the application of sec. 104(a)(3) of the Internal
Revenue Code. Whether the Commonwealth of Pennsylvania expressly
prohibits taxation of disability payments has no relevance in
deciding the issue before us.
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