Shawn Jeffrey Hintz - Page 8

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               Congress enacted section 104(b) to curb perceived abuses of            
          section 104(a)(4).2  Section 104(b)(1) provides that the                    
          exclusion under section 104(a)(4) is restricted to the classes of           
          individuals described in section 104(b)(2), as follows:                     
                    (2) Individuals to whom subsection (a)(4) continues to            
               apply.--An individual is described in this paragraph if–-              
                         (A) on or before September 24, 1975, he was                  
                    entitled to receive any amount described in subsection            
                    (a)(4),                                                           
                         (B) on September 24, 1975, he was a member of any            
                    organization (or reserve component thereof) referred to           
                    in subsection (a)(4) or under a binding written                   
                    commitment to become such a member,                               
                         (C) he receives an amount described in subsection            
                    (a)(4) by reason of a combat-related injury, or                   
                         (D) on application therefor, he would be entitled            
                    to receive disability compensation from the Veterans’             
                    Administration.                                                   
          For purposes of section 104(b)(2)(C), the term “combat-related              
          injury” means personal injury or sickness that is:  (1) Incurred            
          as a direct result of armed conflict, while engaged in extra                



          2The legislative history explains the reasons for the 1976                  
          amendments as follows:                                                      
               In many cases, armed forces personnel have been classified             
               as disabled for military service shortly before they would             
               have become eligible for retirement principally to obtain              
               the benefits of the special tax exclusion on the disability            
               portion of their retirement pay.  In most of these cases the           
               individuals, having retired from the military, earn income             
               from other employment while receiving tax-free “disability”            
               payments from the military. * * * [H. Rept. 94-658, at 152             
               (1975), 1976-3 C.B. (Vol. 2) 695, 844.]                                





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