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determined that the payments petitioner received from PERS should
not have been excluded from income and that petitioner was liable
for a $9,148 deficiency.
Discussion
Section 104(a)(1) provides that gross income does not
include amounts received under workers’ compensation acts as
compensation for personal injuries or sickness. The regulations
expand the scope of section 104(a)(1) to include “a statute in
the nature of a workmen’s compensation act which provides
compensation to employees for personal injuries or sickness
incurred in the course of employment.” Sec. 1.104-1(b), Income
Tax Regs. However, “section 104(a)(1) does not apply to a
retirement pension or annuity to the extent that it is determined
by reference to the employee’s age or length of service, or the
employee’s prior contributions, even though the employee’s
retirement is occasioned by an occupational injury or sickness.”
Id. Nevertheless, a statute that conditions eligibility for
benefits on the existence of a work-related injury or sickness
may qualify as a workers’ compensation act for purposes of
section 104 even though those benefits are called “disability
retirement benefits.” See Take v. Commissioner, 804 F.2d 553,
557 (9th Cir. 1986), affg. 82 T.C. 630 (1984). A statute that
fails to distinguish between work-related and other types of
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Last modified: May 25, 2011