- 11 -
1993, when the Standard policy began, until premiums were waived
in 1997, Mr. Cotler paid the premiums on the Standard policy.
Mr. Cotler, and not the firm, bore the economic burden of the
disability premiums. Accordingly, we conclude that Mr. Cotler
was bearing the economic burden, and therefore the disability
payments Mr. Cotler received in 1997 and 1998 are excludable from
income under section 104(a)(3).
In reaching all of our holdings herein, we have considered
all arguments made by the parties, and, to the extent not
mentioned above, we find them to be irrelevant or without merit.
It is unclear from the record, however, whether after
application of our holding that Mr. Cotler did not have to report
the disability payments from Standard in 1997 and 1998, if his
tax liabilities for 1997 and 1998 remain unpaid. Accordingly, we
will direct the parties to submit computations showing the
correct amount of Mr. Cotler’s tax liabilities for 1997 and 1998.
To reflect the foregoing,
An appropriate order will
be issued.
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Last modified: November 10, 2007