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tax exemption that would have been available for the forgone
Veterans’ Administration benefits.17
Mr. Reimels received his entitlement to full disability
benefits from the Veterans’ Administration. The parties agree
that these benefits are exempt from taxation. There is no
indication that Congress intended section 104(b)(4) effectively
to provide a second, duplicate tax exclusion with respect to
amounts of excludable Veterans’ Administration benefits that the
taxpayer has actually received. See Kiourtsis v. Commissioner,
T.C. Memo. 1996-534.
17 The legislative history to sec. 104(b)(4) states:
At all times, Veterans’ Administration disability
payments will continue to be excluded from gross
income. In addition, even if a future serviceman who
retires does not receive his disability benefits from
the Veterans’ Administration, he will still be allowed
to exclude from his gross income an amount equal to the
benefits he could receive from the Veterans’
Administration. Otherwise, future members of the armed
forces will be allowed to exclude military disability
retirement payments from their gross income only if the
payments are directly related to “combat injuries.”
* * * [S. Rept. 94-938, at 139 (1976), 1976-3 C.B.
(Vol. 3) 49, 177.]
In other words, a retired serviceman ordinarily would be
unable to exclude benefit payments received for a non-combat-
related injury. See sec. 104(b)(2)(C) and (3). If such benefit
payments otherwise meet the requirements of sec. 104(a)(4),
however, sec. 104(b)(4) would allow the serviceman to exclude at
least as much of the payments as equals any Veterans’
Administration benefits which the serviceman would have been
entitled to, but did not, receive.
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