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Finance & Accounting
Pages 3 (753 words)
Name Instructor Course Date 124 Acacia Avenue, Willow Road, Huston, 21st July, 1999. Mr. Waterman, Willow Road, Huston, Cambridge shire, Cb31 3rr Dear Mr. Waterman, RE: WATERMAN, PETITIONER-APPELLANT V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT-APPELLATE This is in response to our meeting dated 1 June, 1999, requesting an opinion on whether the exclusion from income for combat pay contained in section 112 of the Internal Revenue Code (the Code) applies to payments under the Internal Revenue Commission Regulations.
While the United States Court of Appeals upheld the trial court’s findings, not all the judges agreed. He appealed. Law: Mr. Waterman had excluded the tax payment under section 112 as compensation while on active duty in combat zone; he became entitled to the separation payment while he was on this duty. He points out that a separation payment should be treated no differently than other types of compensation that are excluded under section 112, such as reenlistment bonuses, pay for accrued leave, dislocation allowances, and inventions, awards for suggestions, or scientific achievements. Although regulations seem to cover the issue, those regulations were issued in 1993 and were made retroactive, by the Treasury Department, to 1991. The year at issue in this case was 1992. Therefore, at the time Mr. Waterman filed his tax return, there were no regulations covering the issue. Analysis: The exclusion separation payment from gross income applies to compensation received for active service for any month during any part of which the member served in a combat zone. ...
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