William D. and Joyce M. Reimels - Page 20

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          provision, petitioners argue that the amount of Social Security             
          disability insurance benefits to be excluded shall not be less              
          than the disability compensation that Mr. Reimels received in               
          1999 from the Veterans’ Administration.  Petitioners contend that           
          because the Social Security disability insurance benefits                   
          Mr. Reimels received in 1999 were less than his Veterans’                   
          Administration disability compensation, they are entitled to                
          exclude the entire amount of Social Security disability insurance           
          benefits received.  We disagree for the following reasons.                  
               First, subsection (b)(4) of section 104, like just-discussed           
          subsection (b)(2), provides no independent basis for exclusion:             
          for petitioners to be eligible for the claimed exclusion, they              
          must meet the requirements of section 104(a)(4).  See Grady v.              
          Commissioner, T.C. Memo. 1989-55.  We have held that the Social             
          Security disability insurance benefits in question do not meet              
          those requirements.                                                         
               Second, although section 104(b)(4) is not a model of                   
          clarity, its legislative history suggests that it was intended to           
          apply with respect to retired military personnel who do not                 
          receive the Veterans’ Administration benefits to which they are             
          otherwise entitled.  In certain circumstances, section 104(b)(4)            
          provides such persons with a tax benefit at least as great as the           









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