- 5 - of-living allowance be received “in accordance with regulations approved by the President.” The Commissioner has long taken the position that any cost-of-living allowance must actually be authorized by those regulations “and not be merely paid in an amount and in a manner consistent” with them. See Rev. Rul. 87- 29, 1987-1 C.B. 183. There is one case from our Court which might be read to take a contrary position, excluding from gross income a cost-of-living allowance not authorized by those regulations, but calculated to equal those that were. See Hudson v. Commissioner, 20 T.C. 926, 928-29 (1953). Pavich’s situation, though, is not even close to that of the taxpayer in Hudson. The regulations that section 912(2) refers to are those authorized by 5 U.S.C. section 5941. That section-- which, by the way, limits excludible cost-of-living allowances to employees “whose rates of basic pay are fixed by statute” (in contrast to Pavich, whose rate of pay is fixed by Raytheon)-- limits any allowance to 25 percent of an employee’s base pay. Pavich’s Raytheon Allowances, by contrast, ranged from 77.4 to 94.9 percent of his base pay. Since his Raytheon Allowances were set by Raytheon, not the President; since they were not received in accordance with regulations prescribed by the President, but by Raytheon internal policy; and since they were grossly more than the maximum percentage above base pay allowed by law, we conclude that Pavich’s Raytheon Allowances were not “received as cost-of-living allowances in accordance with regulations approvedPage: Previous 1 2 3 4 5 6 7 Next
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