William D. and Joyce M. Reimels - Page 5

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          Commissioner, T.C. Memo. 2003-19; Thomas v. Commissioner, T.C.              
          Memo. 2001-120; Maki v. Commissioner, T.C. Memo. 1996-209.                  
          Absent some exception, then, Mr. Reimels’s Social Security                  
          disability insurance benefits are includable in petitioners’                
          gross income as provided in section 86 and as respondent                    
          determined in the notice of deficiency.  The question is whether            
          section 104 provides an exception that allows petitioners to                
          exclude Mr. Reimels’s Social Security disability insurance                  
          benefits from gross income.                                                 
          II.  Exclusion From Gross Income Under Section 104                          
               A.  The Parties’ Contentions                                           
               Section 104(a) excludes from gross income certain                      
          compensation for injuries or sickness.  Petitioners rely upon               
          section 104(a)(4), which excludes from gross income “amounts                
          received as a pension, annuity, or similar allowance for personal           
          injuries or sickness resulting from active service in the Armed             
          Forces of any country”.  Petitioners contend that the                       
          requirements of section 104(a)(4) are met because the Social                
          Security Administration granted Mr. Reimels’s disability                    
          insurance benefits solely on the basis of his disability, which             
          resulted from Mr. Reimels’s active service in the U.S. Armed                
          Forces.                                                                     

               4(...continued)                                                        
          401-434 (2000); i.e., amounts received as disability insurance              
          benefits.                                                                   





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