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Petitioner husband (Mr. Hurley) was employed as a
correctional officer for the California Department of Corrections
(CDC), at the California Training Facility (CTF) in Soledad,
California, since 1990. Sometime during 1995, Mr. Hurley
sustained a back injury while lifting a heavy coffee urn at work.
He was required to undergo surgery to replace several disks in
his back, and, as a result, the California workers’ compensation
board determined he sustained a 30-percent permanent disability.
Mr. Hurley received the full amount of a lump-sum workers’
compensation settlement payment prior to the taxable years at
issue.
During 1998 and 1999, Mr. Hurley had returned to work full
time as a correctional officer at the CTF. In spite of his 30
percent disability, Mr. Hurley worked a full 40 hours a week and
was no longer receiving any workers’ compensation benefits. The
CDC paid Mr. Hurley at the same rate during 1998 and 1999 as it
did prior to his 1995 injury, and he had the same work duties.
On their 1998 and 1999 Federal income tax returns, petitioners
excluded 30 percent of his salary from gross income because of
Mr. Hurley’s continuing disability. Respondent disallowed this
exclusion.
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