1 Unless otherwise indicated, section references are to the

Internal Revenue Code in effect for the year in issue, and Rule

references are to the Tax Court Rules of Practice and Procedure.

T.C. Memo. 1997-78

UNITED STATES TAX COURT

VICTOR M. VAZQUEZ, JR., Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 22455-95. Filed February 13, 1997.

Victor M. Vazquez, Jr., pro se.

Michael W. Lloyd and Christopher L. Neal, for respondent.

MEMORANDUM OPINION

POWELL, Special Trial Judge: This case was assigned

pursuant to the provisions of section 7443A(b)(3) and Rules 180,

181, and 182.1

Respondent determined a deficiency in petitioner's Federal

income tax for the taxable year 1992 in the amount of $818. At
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the time he filed his petition, petitioner resided in Aurora,

Colorado.

The sole issue is whether petitioner is required to include

in his gross income an amount paid by the U.S. Army (Army) in

satisfaction of a portion of his existing student loan balance. 

The facts may be summarized as follows. Prior to enlisting

in the Army, petitioner incurred student loans to finance his

undergraduate degree. Petitioner enlisted in the Army on June

20, 1989. An enactment known as the Department of Defense

Educational Loan Repayment Programs, 10 U.S.C. sec. 2171 (1988),

authorizes the Secretary of Defense to repay certain student

loans in exchange for service performed on active duty as an

enlisted member in a military specialty specified by the

Secretary. During 1991, petitioner completed a year of service

on active duty in the Army. In 1992, as a result of the prior

year's service, the Army paid $2,985.86 toward petitioner's

outstanding student loan balance (the Army loan repayment).

On a 1992 Federal income tax return, petitioner did not

report any income as a result of the Army loan repayment. In the

notice of deficiency, respondent determined that petitioner

failed to include the Army loan repayment in his 1992 gross

income.

Section 61(a) defines gross income broadly as "all income

from whatever source derived". The Supreme Court "has given a
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liberal construction to this broad phraseology in recognition of

the intention of Congress to tax all gains except those

specifically exempted." Commissioner v. Glenshaw Glass Co., 348

U.S. 426, 430 (1955). Gross income specifically includes

compensation for services and income from discharge of

indebtedness. Sec. 61(a)(1), (12). A payment by an employer in

satisfaction of a liability of an employee generally constitutes

taxable income to the employee. Old Colony Trust Co. v.

Commissioner, 279 U.S. 716, 729-730 (1929); Huff v. Commissioner,

80 T.C. 804, 814-815 (1983). While Congress may provide for

exclusions from gross income, such exclusions are matters of

legislative grace and are construed narrowly. Mostowy v. United

States, 966 F.2d 668, 671 (Fed. Cir. 1992); see also Silverman v.

Commissioner, 28 T.C. 1061, 1067-1068 (1957), affd. 253 F.2d 849

(8th Cir. 1958). A taxpayer seeking a deduction or exclusion

"must be able to point to an applicable statute and show that he

comes within its terms." See New Colonial Ice Co. v. Helvering,

292 U.S. 435, 440 (1934). 

Petitioner has not argued that any specific statutory

exclusions apply to exempt the payment from gross income, and we

are not aware of any that apply. Petitioner, however, argues

that he has been unfairly treated because military personnel in

other professions, such as nurses and doctors, receive tax exempt

educational subsidies. Assuming arguendo that petitioner's
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characterization of the law is correct, his remedy lies with

Congress. We are not at liberty to create exceptions to the

Internal Revenue Code. See id. at 440. Thus, we conclude that

the Army loan repayment constitutes gross income within the

meaning of section 61.

Petitioner also argues that the imposition of interest is

inappropriate since he did not receive a Form W-2 reflecting the

Army loan repayment and, therefore, had no way of knowing that

the Army loan repayment constituted gross income. Generally this

Court has no jurisdiction in a deficiency proceeding over

interest questions. White v. Commissioner, 95 T.C. 209, 213

(1990). Section 7481(c) provides that this Court may redetermine

interest, but only after the decision in a case has become final,

the interest has been assessed, and the taxpayer has paid the

interest in dispute. See Pen Coal Corp. v Commissioner, 107 T.C.

249, 263 (1996). These conditions are not present in this case. 

Furthermore, while section 6404(g), added by section 302 of the

Taxpayer Bill of Rights 2, Pub. L. 104-168, 110 Stat. 1452, 1457

(1996), authorizes this Court to review the Secretary's failure

to abate interest with respect to requests for abatement made

after July 30, 1996, under section 6404(e), petitioner has not

shown that he has made such a request. See Rule 280(b); Coffield

v. Commissioner, T.C. Memo. 1996-365.

To reflect the foregoing,
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Decision will be entered

for respondent.