Robert E. and Carol J. Cawvey - Page 5

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                                     Discussion3                                      
               As previously stated, the issue before the Court is whether            
          certain worker’s compensation benefits petitioner received in               
          lieu of Social Security disability benefits are includable in               
          petitioners’ gross income for taxable year 2001 under section 86.           
               Petitioners maintain that since petitioner did not receive             
          an actual payment from the Social Security Administration during            
          2001 because of the offset of workmen’s compensation benefits               
          received in that year, it is unfair to include the offset amount            
          in their 2001 income.  Respondent maintains that although                   
          petitioners did not receive an actual payment from the Social               
          Security Administration during 2001, they must nevertheless                 
          include the offset amount in their 2001 income under section                
          86(d)(3).                                                                   
               Gross income includes “all income from whatever source                 
          derived” unless specifically excluded.  Sec. 61(a).  Generally,             
          gross income does not include “amounts received under workmen’s             
          compensation acts as compensation for personal injuries or                  
          sickness”.  Sec. 104(a)(1).  Social Security benefits, however,             
          are included in gross income as provided by section 86.                     



          3We decide the issue in this case without regard to the                     
          burden of proof.  Accordingly, we need not decide whether the               
          general rule of sec. 7491(a)(1) is applicable in this case.  See            
          Higbee v. Commissioner, 116 T.C. 438 (2001).                                






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