- 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