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3. Disability Benefits
Included in the stipulated exhibits for this case is
literature from Met Life detailing petitioner’s long-term
disability insurance which provides an explanation of the taxable
consequences resulting from the payout of disability benefits.
At trial, petitioner testified that he had selected “Option 3”3
as his long-term disability plan, and asserted that because his
monthly contribution (an amount equal to one-sixth) for the
premium was deducted from his paycheck ‘after taxes’ that he
should accordingly be entitled to exclude from his gross income
that amount attributable to his contribution (one-sixth of the
approximately $78,000 paid as disability income by Met Life in
2000).
However, it is clear from the information provided in the
Met Life literature that petitioner is misguided in maintaining
this position. First, at LTD-2,4 the brochure describes the
taxability of the payouts, stating that “since [the employee]
paid for the cost of the LTD coverage on a before tax basis ...
the LTD benefits are taxable when you receive them.” Then, at
LTD-14, the brochure reads:
3“Option 3” bases long-term disability benefits on 60
percent of the participant’s pre-disability income.
4“LTD” refers to Met Life’s long-term disability policy
brochure.
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Last modified: May 25, 2011