Louis M. Pavich - Page 5

                                        - 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 approved           





Page:  Previous  1  2  3  4  5  6  7  Next

Last modified: May 25, 2011