Case: Military Service Pension Payments Taxable Without Evidence That They Relate to Disability (S.D. Ga.) (IRC §104)

A disabled veteran’s Department of Defense pension payments were taxable because he did not provide evidence that the payments stem from his service-related disability, a district court held, granting the IRS’s motion for summary judgment and denying a refund of his taxes paid on the pension. While I.R.C. §104(a)(4) provides that disability payments are excludible from taxable income and any taxes paid on pension income are retroactively recoverable if a disability rating is later determined (up to the amount of tax that therefore would not have been paid), Taxpayer was categorized as 100% disabled before he received the payments, …