- 14 -
result of his contributions to the plan and that not more than 60
percent of his benefits were attributable to employer
contributions. See Laws v. Commissioner, T.C. Memo. 2003-21;
Miley v. Commissioner, T.C. Memo. 2002-236.
Second, petitioners have not shown that any amounts
contributed by STRS were included in petitioners’ gross income.
Consequently, petitioners have not established that they are
entitled to exclude portions of the benefits under section 105.9
Third, petitioners’ contention is contrary to the applicable
regulations discussed below. The regulations under section 72
explain the applicability of section 72 to accident and health
plans, as well as to distributions from profit sharing plans
9 In their petition, petitioners also cited sec. 104 in
support of the alleged nontaxable nature of the disability
payments. Since petitioners mentioned sec. 104 at trial only in
their opening statement and did not address it on brief, the
Court assumes that petitioners either have concluded that sec.
104 arguments are subsumed by sec. 105(a) or have abandoned
and/or conceded any sec. 104 issue. In any event, sec. 104 would
be inapplicable here. Sec. 104(a)(3) excludes from gross income
those amounts received by an employee “through accident or health
insurance”. However, amounts are not excluded to the extent that
these amounts were either: (1) Attributable to contributions paid
by the employer which were not included in the employee’s gross
income, or (2) paid by the employer. Petitioners would not be
entitled to exclude Mr. Wright’s benefits under sec. 104(a)(3)
because they failed to establish that Mr. Wright’s contributions
to STRS were used to fund his disability retirement benefits,
much less the portion of the benefits that were funded by his
employee contributions. Conroy v. Commissioner, 41 T.C. 685,
692-693 (1964), affd. 341 F.2d 290 (4th Cir. 1965); Merker v.
Commissioner, T.C. Memo. 1997-277; Shaffer v. Commissioner, T.C.
Memo. 1994-618.
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