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benefit. Sec. 86(d)(3).3 See Mikalonis v. Commissioner, T.C.
Memo. 2000-281; Willis v. Commissioner, T.C. Memo. 1997-290. The
rationale for this provision appears in the legislative history
accompanying that enactment of section 86 by the Social Security
Amendments Act of 1983, Pub. L. 98-21, sec. 121, 97 Stat. 80:
Your Committee’s bill provides that social
security benefits potentially subject to tax will
include any workmen’s compensation whose receipt caused
a reduction in social security disability benefits.
For example, if an individual were entitled to $10,000
of social security disability benefits but received
only $6,000 because of the receipt of $4,000 of
workmen’s compensation benefits, then for purposes of
the provisions taxing social security benefits, the
individual will be considered to have received $10,000
of social security benefits. [H. Rept. 98-25, at 26
(1983).]
In other words, the purpose of section 86(d)(3) is to equalize
3 Sec. 86(d)(3) provides as follows:
SEC. 86(d). Social Security Benefit.--
* * * * * * *
(3) Workmen’s compensation benefits
substituted for social security benefits.–-For purposes
of this section, if, by reason of section 224 of the
Social Security Act * * *, any social security benefit
is reduced by reason of the receipt of a benefit under
a workmen’s compensation act, the term “social security
benefit” includes that portion of such benefit received
under the workmen’s compensation act which equals such
reduction.
At trial, Mrs. Flores testified that she received workmen’s
compensation in an amount greater than the $11,855 “offset” that
was identified in her 2002 Form 1099-SSA, described supra p.3.
In this regard, we emphasize that sec. 86(d)(3) serves to treat
workers’ compensation benefits as though they were Social
Security benefits only to the extent of the offset amount.
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