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with respect to the SSDI benefits received by petitioner is
consistent with the above formula.4
Although not entirely clear from the record, some of the
SSDI benefits received in 2000 relating to prior years might have
been offset by worker’s compensation benefits also received
during those prior years. If so, the Federal income tax
consequences with respect to petitioner’s SSDI award remain the
same because the worker’s compensation benefits causing the
reduction in Social Security benefits are, for Federal income tax
purposes, treated as Social Security benefits. Sec. 86(d)(3);5
4 Social Security benefits are included in the recipient’s
gross income in the taxable year in which the benefits are
received. Sec. 86(a)(1). An election is available to a taxpayer
who receives a lump-sum payment of Social Security benefits
during the taxable year in which a portion of the benefits is
attributable to previous taxable years. Sec. 86(e). Sec. 86(e)
provides that, if the election is made, the amount included in
gross income for the taxable year of receipt must not exceed the
sum of the increases in gross income for those previous taxable
years that would result from taking into account the portion of
the benefits attributable to the previous taxable years.
Petitioners did not make an election under section 86(e) with
respect to the lump-sum SSDI benefits received in 2000.
5 Sec. 86(d)(3) provides:
SEC. 86 (3). Workmen’s compensation benefits
substituted for Social Security benefits.--For purposes
of this section, if, by reason of sec. 224 of the
Social Security Act(or by reason of sec. 3(a)(1) of the
Railroad Retirement Act of 1974), 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.
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Last modified: May 25, 2011