# PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b),THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE.T.C. Summ ary Opi ni on 20 14 -1 09

UNITED STAT ES TAX COURT

KEVIN M. CAMPB ELL AN D PAMELA J. CAMP BELL, Peti ti on ers v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 29 22 2- 13 S. Fil edDecem be r 22 , 20 14 .
Caro l An n S zcze pa ni k, fo r pe ti ti on ers . Nan cy P. Kli ng sh irn , forres po nd en t.

SUMM ARY OPINION GUY, Spec ia l Tri al Ju dg e: Thi s ca se was h eardpu rs uantto th e p ro vi si on s of sec ti on 74 63 of t he Int ern al Rev enue Co de ineffe ctwhenth e p et it io n was fil ed . Pur su an t t o s ect io n 7 46 3( b) , th e d eci si on to be en te redis no t re vi ewab le by 1
Unl es s o th erwi se in di cat ed , sec ti on refe ren ces are t o the Int ern al Rev enue 1 (co nt in ue d...)-2
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an y othe r co urt, an d thi s o pi ni on sh al l n otbe tre at edas p rece de ntforan y ot he r cas e. Res po nd en t d et erm in eda de fic ie nc y of $ 2,8 00 inpe ti ti on ers ’ Fed eral in co m e ta x fo r 20 11 . Peti ti on ers , hu sb an d a ndwife , fil eda ti m el y pe ti ti on for red et erm in at io n wi thth e Co urt p ur su an t t o s ect io n 6 21 3( a). At the ti m e th e pe ti ti on was fi le d, p et it io ne rs res id edinOhi o. The so le is su e rem ai ni ng forde ci si on is whet he r pe ti ti on ers m ay ex cl ud e fro m gro ss in co m e ret ire m en t p ay of $ 9,2 10 th atMr. Campbe ll rece iv edfro m th e U.S. Coa stGuar d (C oa stGuar d) du rin g 2 01 1. To th e ex te ntno t d is cu ss edhe rei n, 2 ot he r is su es are co m

pu ta ti on al an d fl ow fr om ou r de ci si on inth is cas e. Bac kg ro un d So m e o f th e fac ts ha ve be enst ip ul at edan d a re s o fo un d. Th e st ip ul at io n o f fact s an d the acco m

pa nyin g e xh ib it s ar e in co rp or at edhe rei n b y th is refe ren ce.

(...co nt inue d) 1 Co de , as a m en de d a ndineffe ctfor20 11 , andRu le refe ren ces are t o t he Tax C ou rt Ru le s o f Prac ti ce an d P ro cedur e. Mo ne tary am ount s ar e ro un de d t o t he ne ares t do ll ar. Pet it io ne rs rep orte d tha t M r. Cam pb el l re cei ve d wag es of $ 75 ,36 6 fr om th e 2 Cu y ah og a Co un ty Sheri ff’s Dep art m en t dur in g 2 01 1. Re sp on de ntco nc ed es th at pe ti ti on ers are en ti tl edto reduc e Mr. Ca m pb el l’s wag es by $9,3 60 .-3
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I. Mr. Cam

pb el l’s Co as t Gu ardServ ic e an d Di sabi li ty Reti rem en t Mr. Ca m pb el l en li st edinth e Co as t Gu ardon Ju ly 12, 1 98 7. Hi s m il it ary se rv ic e was cu t s ho rt i n 1 99 0, h owe ve r, whe n h e was di ag no se d wi th in su li nde pe nd en t d iabe te s m el li tu s. Th e Co as t Gu ardco nc lu de d t ha t M r. Cam pb el l’s il ln es s re nd eredhi m

un fitfordu ty. A. Statut ory

Pro vi si on s At al l t im es rel ev an t t o thi s ca se , chapt er 6 1 o f ti tl e 1 0 o f th e Uni te d S ta te s Co de est ab li sh edth e st an da rd s an d p ro ces se s b y whi chth e arm edfor ces (in cl ud in g the Co as t Gu ard ) de te rm in e whe th er a s erv ic e m em be r m ay be ret ire d 3
orsep arat edfro m

servi ce b ecau se of am ed ic al di sabi li ty. Gene ral ly spe ak in g, a se rv ic e m em

be r fo un d u nf

itfordu ty becau se of ape rm an en t an d s tabl e p hysic al di sabi li ty is el ig ib le to rece iv e ret ire m en t p ay if the m em

be r ha s atlea st20 y ears of servi ce o r hi s d is ab il ity

is rat edat l eas t 3 0% u nd er the Depa rtment o f Vet eran s Affai rs st an da rdsch edul e o f rat in g d is ab il it ie s (VASR D). See 1 0 U.S.C. s ec. 1 20 1 (2 01 2) . A serv ic e m em

be r othe rwis e en ti tl edto ret ire pe rm an en tl y un de r th e 4 pr ov is io ns of 1 0 U.S.C. s ec. 1 20 1, b utwho se di sabi li ty is n otde te rm in edto be

The Co as t Gu ardis a m il it ary se rv ic e an d abra nc h o f th e arm edfor ces of 3 th e Uni te d S ta te s. See 14 U.S.C. sec . 1 (2 01 2) . The VASRD is setforth at 3 8 C .F.R. pa rt 4 (20 12 ). 4-4
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pe rm an en t an d s tabl e, is eli gi bl e to be pl acedintem po rary dis ab il ity

ret ire m en t st atus . See 1 0 U.S.C. s ec. 1 20 2 (2 01 2) . A serv ic e m em be r in tem

po rary dis ab il ity ret ire m en t s ta tu s m

us t s ub m itto pe rio di c p hysic al ex am in at io ns , anda de te rm in at io n wh ethe r a p art ic ul ar d is ab il ity is pe rm an en t an d s tabl e m us t b e m ad e withi n fi ve y ears . See 1 0 U.S.C. s ec. 1 21 0( a) an d (b ) (2 01 2) . B. Tem po rary Disab il ity

Ret ire m en t Afte r hi s d ia gn os is th e Co as t Gu ardev al ua te d M r. Cam pb el l an d, ef

fect iv e Aug us t 5 , 19 90 , pl acedhi m intem po rary dis ab il ity

ret ire m en t s tatu s. At the ti m e th e Co as t Gu ardass ig ne d M r. Cam pb el l a VASR D rat in g o f 40 %. By let te r da te d S ep te m

be r 20 , 19 90 , th e Co as t Gu ardin fo rm edMr. Cam pb el l tha t h e was en ti tl edto m on th ly reti rem en t p ay equa l t o t he pro du ctof hi s b as e p ay

m ul ti pl ie d b y

hi s d is ab il ity

rat in g. Se e 1 0 U.S.C. s ec. 1 40 1 (2 01 2) . The let te r furth er s tate d tha t the Co as t Gu ardwou ldwithh ol d F ed eral in co m e ta x fro m hi s m on th ly reti rem en t p aym en ts . Mr. Cam pb el l s ub se qu en tl y

be ga n t o rece iv e m on th ly reti rem en t p ay of $ 40 3 (o ffs etby $50 all ot te d t o s urvi vo r be ne fit s an d $ 20 forFed eral in co m e ta x wi th ho ld in g) .-5 -

C. Mr. Ca m

pb el l’s Co m

m un ic at io ns W ith the Co as t Gu ard Fro m earl y 19 92 th ro ug h 1 99 5 M r. Cam pb el l at te m

pt edto co nv in ce the Co as t Gu ardth athi s re ti rem en t p ay was e xe m

ptfro m Fed eral in co m e ta x. Durin g th is pe rio d h e subm it te d n um ero us Fo rm s W-4, Em pl oyee’s W ithh ol di ng All owa nc e Certi fic at e, st at in g tha t h e was ex em ptfro m in co m e ta x wi th ho ld in g. By let te r da te d J un e 1 8, 1 99 4, M r. Cam pb el l p ro vi de d t he Co as t Gu ardwith a co py of a p ub li cat io n t it le d “ PHYSICAL DISABI LITY EVAL UATION SYSTEM” wh ic h was pro vi de d t o h im by Coas t Gu ardleg al co un se l atth e ti m e o f hi s re ti rem en t. The publ ic at io n s ta te d t ha t Co as t Gu arddi sabi li ty reti rem en t p ay is no t t ax ab le . The rec or d d oe s n otin cl ud e an y res po ns e fro m

th e Co as t Gu ardto Mr. Ca m pb el l’s en tre at ie s, an d the Co as t Gu ardco nt in ue d t o wi th ho ldFed eral in co m e ta x fr om

hi s m on th ly reti rem en t p aym en ts . D. Perm an en t Di sabi li ty Reti rem en t By let te r da te d Ap ril 6, 1 99 5, the Co as t Gu ardno ti fie d M r. Cam pb el l tha t hi s d iabe te s qua li fie d a s a p erm an en t p hysic al di sabi li ty, he was u nf itfordu ty, an d he wou ldbe pe rm an en tl y ret ire d fr om

th e Co as t Gu ardeffe ct iv e May 4, 1 99 5. At th atti m e th e Co as t Gu ardass ig ne d M r. Cam pb el l a VASR D rat in g o f 60 %, andhe ret ire d u nd er the pro vi si on s o f 10 U.S.C. sec . 12 01 . His r et ire m en t p ay was co m pu te d b y m ul ti pl y in g h is ba se pa y

by 60% (h is di sabi li ty rati ng ). The C oa st-6
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Gua rdag ai n i nf

orm edMr. Campbe ll th athi s re ti rem en t p ay was t ax ab le an d t ha t i t wou ldwithh ol d F ed eral in co m e ta x fr om hi s m on th ly paym en ts . II. Dep art m en t o f Vet eran s Aff ai rs Mr. Ca m pb el l t es ti fie d tha t atth e ti m e h e was pe rm an en tl y ret ire d fr om

th e Co as t Gu ard , he c on ta ct edth e Dep art m en t o f Vet eran s Aff ai rs (VA), subm it te d t o a p hysic al ex am in at io n, an d re cei ve d aVA di sabi li ty rati ng . He cou ldno t re cal l th e p erce nt ag e o f hi s VA d is ab il ity rat in g b utrem em

be redth atitwas l es s tha n the di sabi li ty rati ng th athe rece iv edfro m th e Co as t Gu ard . Mr. Cam pb el l was un ab le to pro du ce an y

do cu m en ts fro m

th e VA rel at edto hi s p hysic al ex am in at io n o r di sabi li ty rati ng . III. Mr . Cam

pb el l’s Em

pl oym en t as a Dep ut y

Sh eri ff Sh ortl y aft er h e was pl acedintem po rary dis ab il ity

ret ire m en t s ta tu s b y

th e Co as t Gu ard , Mr. Cam

pb el l was hi redby the Cuy ah og a Co un ty Sheri ff’s Offi ce as a d ep uty sh eri ff. He co nt in ue d t o b e em pl oyed b y th e sh eri ff’s o ffi ce atth e ti m e o f tri al an d t es ti fie d tha t h e was ab le to pe rfo rm hi s dut ie s wi th ou t an y

sp eci al acco m m od at io ns .-7 -

IV. Tax Re po rti ng A. Form s 1 09 9- R Ove r th e y ears , th e Co as t Gu ardrou ti ne ly iss ue d t o M r. Cam pb el l Fo rm s 10 99 -R, Dis tri bu ti on s Fr om Pen si on s, An nu it ie s, Re ti rem en t o r Pro fit -Sh ari ng Pl an s, IRAs, In su ran ce Co nt ract s, et c., rep orti ng th athe ha d re cei ve d t ax ab le ret ire m en t p ay . It was Mr. Campbe ll ’s pra ct ic e to pro vi de th e Fo rm s 1 09 9- R to hi s acco un tant , Ral ph DeLuc a, who pre pa redan d fi le d p et it io ne rs ’ ta x re tu rn s. Mr . DeLuc a te st ifi edat t ria l tha t h e ro ut in el y rev ie wedth e Fo rm s 1 09 9- R, co nc lu de d th atth e ret ire m en t p aym en ts were n otin cl ud ab le inin co m e, an d e xc lu de d t he pa ym en ts fro m

pe ti ti on ers ’ gr os s i nc om e. B. Co nt actW ith the Int ern al Rev enue Serv ic e (IR S) Eve ry few y ears , th e IRS is su edto Mr. Campbe ll a Not ic e CP- 20 00 pr op os in g t o i nc reas e h is tax ab le in co m e b y th e am ou ntof h is Co as t Gu ard ret ire m en t p ay . Mr. Cam pb el l fo rward edth e n ot ic es to Mr. DeLu ca, wh o wo ul d pr om pt ly con ta ctth e IRS an d a ss ertth atth e ret ire m en t p ay was e xe m

ptfro m Fed eral in co m e ta x. Aft er thi s ex ch an ge , Mr. Cam pb el l n orm al ly recei ve d a“No Ch an ge ” le tt er fro m

th e IRS acce pt in g h is tax return a s fi le d. The reco rdin cl ud es a “No Ch an ge ” le tt er tha t the IRS i ss ue d t o M r. Cam pb el l fo r th e ta xabl e y ear 1 99 1. Al th ou gh th e le tt er i nv it edMr. Campbe ll to-8
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subm itanoff

ic ia l re qu es t fo r a l et te r ru li ng reg ard in g t he st atus of h is ret ire m en t pa y , he f ai le d t o d o s o. V. Peti ti on ers ’ 20 11 Tax R eturn In20 11 Mr. Campbe ll rece iv edCo as t Gu ardret ire m en t p ay of $ 9,2 10 . Pet it io ne rs ti m el y

fil eda joi ntFed eral in co m e ta x re tu rnfor20 11 rep orti ng th e ret ire m en t p ay

onli ne 16 a o f th ei r return a s p en si onan d a nn ui ty inc om e, bu t the y ex cl ud edth atam ou ntfro m th e ta xabl e am ou ntof p en si onan d a nn ui ty inc om e rep orte d o n l in e 1 6b . As pr ev io us ly dis cu ss ed , res po nd en t i ss ue d ano ti ce o f de fic ie nc y

to pe ti ti on ers de te rm in in g t ha t M r. Cam pb el l’s re ti rem en t p ay

is requi redto be in cl ud edinth ei r gr os s i nc om e. Dis cu ss io n The Co m m is si on er’s d et erm in at io ns ina no ti ce o f de fic ie nc y are g en eral ly pr es um edco rrec t, an d the tax pa y er n orm al ly bears th e b ur de n o f pr ov in g tho se de te rm in at io ns are erro ne ou s. Ru le 14 2( a)(1 ); Welc h v . Helv eri ng , 29 0 U.S. 1 11 , 11 5 (1 93 3) . 5 Sect io n 6 1( a) p ro vi de s tha t g ro ss in co m e m ean s “ al l i nc om e fro m what ev er so ur ce d eri ve d” . Pen si on s an d re ti rem en t al lo wan ces co ns ti tu te gro ss in co m e
Pet it io ne rs do no t co nt en d t ha t the bu rd enof p ro of sh ou ldbe sh ift edto 5 res po nd en t und er s ec. 7 49 1( a).-9
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un le ss ex cl ud edby law. Sec. 6 1( a)(1 1) ; s ec. 1 .61 -1 1( a), In co m e Tax Reg s. Mi li tary ret ire m en t p ay

is pe ns io n i nc om e wit hi n t he m ean in g o f se ct io n 6 1( a)(1 1) . Whe el er v . Comm is si on er, 1 27 T.C. 20 0, 2 05 n.1 1 (2 00 6) , aff’d, 5 21 F.3d12 89 (1 0t h C ir. 2 00 8) . It i s wel l es tabl is he d tha t s ta tu to ry ex cl us io ns fro m

in co m e are na rro wly co ns tru ed . Comm is si on er v . Sch le ie r, 51 5 U.S. 3 23 , 32 8 (1 99 5) . Taxp ay ers se ek in g a n e xc lu si on fro m in co m e m

us t d em on st rat e th atth ey are el ig ib le forth e ex cl us io n a nd“br in g the m se lv es withi n t he cle ar s co pe of t he ex cl us io n.” Dob ra v. Co m m is si on er, 1 11 T.C. 33 9, 3 49 n.1 6 (1 99 8) . I. Excl us io n fo r Mi li tary Ret ire m en t Pa y Sect io n 1 04 (a)( 4) pro vi de s the ge ne ral rul e th atam ou nt s re cei ve d a s a pe ns io n, an nu ity , or s im il ar al lo wan ce fo r pe rs on al in juri es or s ic kn es s re su lt in g fro m act iv e se rv ic e in th e arm edfor ces of a ny cou nt ry are n otin cl ud edingro ss in co m e. Sect io n 1 04 (b )(1 ) an d (2 ), ho wev er, l im it s the ex cl us io n p res cri be d i n subs ect io n (a )(4 ), as rel ev an t h ere, t o a n i nd iv idua l wh o “ on ap pl ic at io n t he refo r * * * wo ul d b e en ti tl edto rece iv e d is ab il ity co m pe ns at io n fr om

th e Vet eran s Adm in is tra ti on .” Sect io n 1 04 (b )(4 ) furth er p ro vi de s tha t i f anin di vi du al is 6 W ith l im it edex cep ti on s, b en efi ts adm in is te redby the VA hav e lo ng be en 6 ex em ptfro m tax at io n. Se e 3 8 U.S.C. s ec. 3 10 1( a) (1 95 8) (th e p red eces so r to 38 (co nt in ue d...)-1 0-

de sc rib edinsubs ect io n (b )(2 ), th e am ou ntex cl ud ab le fro m gro ss in co m e und er subs ect io n (a )(4 ) fo r an y

pe rio d “ sh al l n otbe les s tha n t he m ax im um am ou nt whi chsu chin di vi du al , onap pl ic at io n t he refo r, wou ldbe en ti tl edto rece iv e as di sabi li ty com

pe ns at io n fr om

th e Vet eran s’ Adm in is tra ti on .” 7 The res tri ct io ns im

po se d i n s ect io n 1 04 (b ) are be tt er u nd ers to odinth e li gh t of th e le gi sl at iv e h is to ry

un de rlyin g t he Tax R efo rm Act o f 19 76 , Pub . L. No. 94
- 45 5, s ec. 5 05 (b ), 90 Sta t. at15 67 . At th atti m e Co ng res s re co gn iz edth atth e ex cl us io n fr om

gro ss in co m e p res cri be d i n s ect io n 1 04 (a)( 4) in vi te d t ax pa y er ab us e, whi chitde sc rib edinrel ev an t p artas f ol lo ws: Cri ti ci sm of t he ex cl us io n o f arm edfor ces di sabi li ty pen si on s fro m in co m e fo cu se s o n anu m be r of cas es in vo lv in g t he di sabi li ty ret ire m en t o f m il it ary pe rs on ne l. Inm an y cas es , arm edfor ces (...co nt inue d) 6 U.S.C. se c. 53 01 (a)( 1) (20 12 )); W al la ce v . Comm is si on er, 1 28 T.C. 13 2, 1 41 n.5 (2 00 7) . InRei m el s v . Comm is si on er, 1 23 T.C. 24 5, 2 57 (20 04 ), aff’d, 4 36 F.3d34 4

7 (2 d C ir. 2 00 6) , we st at edinrel ev an t p art : [A]lth ou gh sec ti on 10 4( b) (4 ) is no t a m od el of c larit y , it s l eg is la ti ve hi st ory su gg es ts th atitwas i nt en de d t o app ly w ith re sp ectto ret ire d m il it ary pe rs on ne l wh o d o n otrece iv e th e Vet eran s’ Adm in is tra ti on be ne fit s t o wh ic h the y

are o th erwi se en ti tl ed . In ce rta in ci rcu m st an ces , sec ti on 10 4( b) (4 ) pr ov id es su chpe rs on s wi th a ta x be ne fitat l eas t as gre atas t he tax ex em pt io n t ha t wo ul d h av e b een av ai labl e fo r th e fo rg on e Vet eran s’ Adm in is tra ti on be ne fit s.-1 1-

pe rs on ne l h av e b eencla ss ifi edas d is ab le d fo r m il it ary se rv ic e sh ortl y be fo re the y

wou ldha ve be co m e el ig ib le forret ire m en t p rin ci pa ll y to ob ta inth e b en efi ts of t he sp eci al tax ex cl us io n o n t he di sabi li ty po rti on of t he ir r et ire m en t p ay . In m os t o f th es e cas es th e in di vi du al s, ha vi ng ret ire d fr om

th e m il it ary, earn in co m e fro m ot he r em pl oym en t whi le rece iv in g t ax -fre e ‘dis ab il ity ’ pa y m en ts fro m

th e m il it ary. The co m m it te e que st io ns th e equi ty of al lo win g re ti redm il it ary pe rs on ne l to ex cl ud e th e p aym en ts whi chth ey rece iv e as tax -ex em

ptdi sabi li ty in co m e whe n the y

are ab le to earn subs tant ia l am ou nt s o f in co m e fro m civ il ian wo rk , des pi te di sabi li ti es su chas h ig h b lo odpre ss ur e, arthr it is , etc . * * * * * * * The co m m it te e am en dm en t el im in at es th e ex cl us io n o f di sabi li ty paym en ts fro m

in co m e fo r th os e co ve redun de r se ct io n 10 4( a)(4 ), th atis , m em

be rs of t he arm edfor ces of a ny cou ntry , NOAA, the Publ ic Heal th Serv ic e an d the Fo rei gn Serv ic e. Thi s ch an ge ap pl ie s o nl y

pro sp ect iv el y

to pe rs on s wh o jo in th es e go ve rn m en t s erv ic es aft er Se pt em be r 24 , 19 75 . Spe ci fic ex cep ti on s co nt inue th e ex cl us io n i n c ert ai n c as es forfutur e d is ab il ity pa ym en ts fo r in juri es an d s ic kn es s re su lt in g fr om act iv e se rv ic e in th e arm ed fo rces of t he Uni te d S ta te s. At al l t im es , Veter an s’ Adm in is tra ti on di sabi li ty paym en ts wil l co nt inue to be ex cl ud edfro m gro ss in co m e. Inad di ti on , eve n i f a fu tu re s erv ic em anwho ret ire s d oe s n otrece iv e h is di sabi li ty ben efi ts fro m th e Vet eran s’ Adm in is tra ti on , he wi ll st il l b e al lo wedto ex cl ud e fro m hi s g ro ss in co m e anam ou ntequa l t o t he be ne fit s h e co ul d rece iv e fro m

th e Vet eran s’ Adm in is tra ti on . Oth erwi se , futur e m em be rs of t he arm edfor ces wil l b e al lo wedto ex cl ud e m il it ary di sabi li ty reti rem en t p aym en ts fro m th ei r gr os s i nc om e o nl y

if the pa ym en ts are d ire ct ly relat edto ‘ co m ba t i nju rie s.’ * * * S. Rep t. No . 94 -9 38 , at 1 38 -1 39 (19 76 ), 19 76 -3 C.B. (Vo l. 3 ) 49 , 17 3- 17 7; see Kio urts is v. Co m

m is si on er, T.C. Mem o. 1 99 6- 53 4.-1 2-

II. Dis ab il ity

Rat in gs A. VA The Uni te d S ta te s wi ll co m pe ns at e a v et eran of t he arm edfor ces fora di sabi li ty resu lt in g fr om

pe rs on al in

jury suff eredor d is eas e co nt ract edinth e li ne of du ty andinact iv e se rv ic e if th e v et eran was d is ch arg edor r el eas edun de r co nd it io ns othe r th andi sh on or ab le an d i f th e d is ab il ity is no t the res ul t o f th e ve te ran ’s ownwil lfu l m is co nduc t o r ab us e o f al co ho l o r dr ug s. See 38 U.S.C. se cs . 11 10 , 11 31 (20 12 ). In t hi s re ga rdth e VA is au th or iz edto ad op t a s ch edul e of rat in gs of r educ ti on s i n e arn in g c ap aci ty from sp eci fic in

juri es ba se d, as far as pr act ic ab le , up on th e av erag e im pa irments of e arn in g c ap aci ty resu lt in g fr om su ch in juri es inciv il oc cupa ti on s. See 38 U.S.C. sec . 11 55 (20 12 ) (p ro vi di ng in pe rti ne ntpa rt tha t the VASRD sh al l b e co ns tru ct edso as t o p ro vi de on ly 10 g rad es of di sabi li ty, e.g ., 10 %, 20 %, andso on , up on whi chpa ym en ts of c om pe ns at io n sh al l b e b as ed ). Co m

pe ns at io n a m ou nt s fo r eac h o f th e VA’ s 1 0 g rad es of di sabi li ty are fix edby statut e. See 3 8 U.S.C. s ecs . 11 14 , 11 34 (20 12 ). In19 95 th e VASRD (Di ag no st ic Co de 79 13 ) pr ov id edth e fo ll owi ng fiv e di sabi li ty lev el s an d ra ti ng cri te riafordi ab et es m el li tu s:-1 3-

79 13 Diab et es m el li tu s Rati ng Requi rin g m or e th anon e d ai ly inject io n o f in su li n, re st ric te d di et , andreg ul at io n o f act iv it ie s (a vo id an ce o f st renuo us oc cupa ti on al an d re crea ti on al act iv it ie s) with e pi so de s o f ke to aci do si s o r hypo gl y cem ic reac ti on s re qu iri ng at l eas t th ree h os pi ta li zat io ns pe r y ear o r week ly vis it s t o adi ab et ic care pro vi de r, pl us eit he r pr og res si ve lo ss of we ig htan d st ren gt h o r co m

pl ic at io ns th atwou ldbe co m pe ns ab le if se pa rat el y

ev al ua te d............. ....... ....... ....... ....... ....... ....... ....... ....... . 10 0 Requi rin g i ns ul in , res tri ct eddi et , andreg ul at io n o f act iv it ie s with e pi so de s o f ke to aci do si s o r hypo gl y cem ic reac ti on s requi rin g o ne or t wo h os pi ta li zat io ns pe r y ear o r twi ce a m on th vi si ts to a di ab et ic care pro vi de r, pl us co m pl ic at io ns th atwou ld no t b e co m

pe ns ab le if s ep arat el y

ev al ua te d............. ....... ....... ....... . 60 Requi rin g i ns ul in , res tri ct eddi et , andreg ul at io n o f act iv it ie s....... 40 Requi rin g i ns ul in an d re st ric te d d ie t, o r; o ral hypo gl y cem ic ag en t an d re st ric te d d ie t............ ....... ....... ....... ....... ....... ....... ....... ..... 20 Man ag eab le by restric te d d ie t o nl y ....... ....... ....... ....... ....... ....... ....... 10 See 3 8 C .F.R. se c. 4.1 19 (19 96 ). B. Co as t Gu ard As p rev io us ly m en ti on ed , to qu al ify for d is ab il ity ret ire m en t fr om

th e arm ed fo rces a se rv ic e m em

be r ge ne ral ly m

us t b e fo un d u nf

itto pe rfo rm

th e dut ie s o f hi s of fic e, gr ad e, orran k b ecau se of p hysic al di sabi li ty, se e 1 0 U.S.C. s ec. 1 20 1( a) (2 01 2) ; Pa rk s v . Comm is si on er, T.C. Mem o. 1 97 9- 18 2, an d m us t h av e atlea st20-1 4-

y ears of s erv ic e o r a d is ab il ity th atis rat edat l eas t 3 0% u nd er the VASRD at t he ti m e o f th e d et erm in at io n, s ee 1 0 U.S.C. s ec. 1 20 1( b) (3 ). III. Mr . Cam

pb el l’s Re ti rem en t Pa y Res po nd en t d et erm in edth atMr. Campbe ll ’s Coa stGuar d re ti rem en t p ay is no t ex cl ud ab le fro m

gro ss in co m e. Mr. Ca m

pb el l d is pu te s re sp on de nt ’s de te rm in at io n a ndco nt en ds th athi s re ti rem en t p ay qu al ifi es for

ex cl us io n u nd er se ct io n 1 04 (a)( 4) be cau se he othe rwis e wou ldbe en ti tl edto VA di sabi li ty ben efi ts withi n the m ean in g o f se ct io n 1 04 (b ). Whe n M r. Cam

pb el l’s d is ab il ity

was d ia gn os ed , he d idno t h av e th e y ears of se rv ic e n eed edto qu al ify for a d is ab il ity ret ire m en t. The Co as t Gu ardne ve rth el es s co nc lu de d tha t h e was en ti tl edto a di sabi li ty reti rem en t b ecau se hi s VASRD rat in g ex ceed ed30 %. Ind eed , th e Co as t Gu ardul ti m at el y co nc lu de d tha t M r. Cam pb el l’s VASRD rat in g was 60 %. As d is cu ss edab ov e, se ct io n 1 04 (b )(2 ) li m it s the ex cl us io n fr om gro ss in co m e fo r di sabi li ty paym en ts to in di vi du al s wh o wo ul d b e en ti tl edto rece iv e di sabi li ty com

pe ns at io n fr om

th e VA up onap pl ic at io n. Se ct io n 1 04 (b )(4 ) fu rth er pr ov id es th atth e am ou ntex cl ud edun de r se ct io n 1 04 (a)( 4) wil l n otbe les s tha n the
m ax im um am ountwhi chth e in di vi du al wou ldbe en ti tl edto rece iv e as di sabi li ty co m pe ns at io n fr om

th e VA onap pl ic at io n.-1 5-

Mr. Ca m pb el l t es ti fie d tha t atth e ti m e th e Co as t Gu ardde te rm in edth athe was tem po rari ly dis ab le d, h e subm it te d t o aph y si cal ex am in at io n a t the VA and was award eda di sabi li ty rati ng . He cou ldno t re m em be r th e p reci se VA di sabi li ty rat in g andon ly recal le d tha t i t was les s tha n the 60 % di sabi li ty rati ng th atth e Co as t Gu ardaward ed . W e are un ab le to de te rm in e, on th is reco rd , th atMr. Campbe ll wou ldbe en ti tl edto rece iv e d is ab il ity co m pe ns at io n fr om

th e VA. Alth ou ghth e Co as t Gua rdan d the VA app ly the same rati ng st an da rd s- -th e VASRD-- the Co as t Gu ard an d the VA app ro ach th e que st io n o f di sabi li ty rati ng s fr om di ffer en t p ers pe ct iv es . Whe reas th e Co as t Gu ardfoc us es on whethe r a s erv ic e m em be r is ab le to pe rfo rm hi s o r he r m il iary

du ti es at agi ve n t im e, th e VA rat es di sabi li ti es by w ei gh in g the im pa ctof a n i nju ry

or i ll ne ss ona ve te ran ’s earn in g c ap aci ty in a c iv il oc cupa ti on ov er h is or h er l ife ti m e. See St in e v . Uni te d S ta te s, 9 2 F ed . Cl. 7 76 , 79 5 (2 01 0) (“ [A] rati ng di sp ari ty betweenth e two syste m s i s n otun us ua l b ecau se of t he di ffer in g s tand ard s tha t m us t b e ap pl ie d.” ), aff’d, 4 17 Fed . App x. 9 79 (Fed . Cir . 20 11 ); Lo ckwoo d v . Uni te d S ta te s, 9 0 F ed . Cl. 2 10 , 21 9 (2 00 8) (“ Bo th th e Dep artm en t o f Vet eran s Aff ai rs an d t he m il it ary se rv ic e b ran ch es rel y on th e * * * [VASRD] , ho wev er, the y do so indi ffer en t ways.”); see als o C le ary v. Co m m is si on er, 6 0 T.C. 1 33 , 14 0 n .10 (19 73 ) (‘“ [T]he b as is for* * * [VA] acti on-1 6-

is di ffer en t fr om

th e b as is up onwhi cha ret iri ng bo ardde te rm in es whet he r or no t anoff ic er i s en ti tl edto ret ire m en t fo r ph y si cal di sabi li ty[.] ”’ (qu ot in g F ur lo ng v. Uni te d S tate s, 1 53 Ct. Cl . 55 7, 5 65 (19 61 ))). Altho ug h we r eco gn iz e th e se rio us ne ss of M r. Cam pb el l’s i ll ne ss , we hav e no way of kno win g wh ethe r th e VA wou ldawardhi m di sabi li ty com

pe ns at io n, an d i f so , th e am ou ntth athe wou ldbe co m pe ns at ed . Con se qu en tl y , we are u nabl e to co nc lu de th atan y

am ountof h is Co as t Gu ardret ire m en t p ay is ex cl ud ab le fro m gr os s i nc om e und er s ect io n 1 04 (a)( 4) . IV. Esto pp el Inth e al te rn at iv e, pe ti ti on ers po in t t o t he IRS’ “ co ur se of c on du ct ” o ve r m an y y ears an d a ss ertth atres po nd en t s ho ul d b e p recl ud edfro m de te rm in in g tha t Mr. Ca m pb el l’s re ti rem en t p ay

is tax ab le inth is cas e. Sp eci fic al ly, pe ti ti on ers em ph as iz e th atth e IRS is su ednu m ero us “No Ch an ge ” le tt ers to Mr. Campbe ll ov er the y ears ackno wled gi ng th athi s re ti rem en t p ay is ex em ptfro m Fed eral in co m e ta x. As pe ti ti on ers see it , Mr. Cam pb el l i s en ti tl edto clo su re atth is po in t. It i s wel l s et tl edth ateach tax y ear i s the ori gi n o f a n ew ta x l iabi li ty, an d each y ear s tand s o n i ts own . Aut o. Cl ub of M ic h. v . Comm is si on er, 3 53 U.S. 18 0, 18 3- 18 4 (1 95 7) . The Co m m is si on er i s n otrequi redforan y gi ve n year to all ow a ta x b en efi t p erm it te d fo r a p rev io us or s ub se qu en t year. See, e.g ., Pek ar v .-1 7-

Co m m is si on er, 1 13 T.C. 15 8, 1 66 (19 99 ). The ac cep tanc e o f or acqui es cen ce i n returns fil edby a tax pay er i n p rev io us y ears crea te s n o e st op pe l ag ai ns t the Co m m is si on er, n ordo es th e o ve rlo ok in g o f anerro r in a return upo n aud itcreate an y su chest op pe l. See Dix on v. Un it edSta te s, 3 81 U.S. 68 , 72 -7 3 (1 96 5) ; Au to . Cl ub of M ic h. v . Commis si on er, 3 53 U.S. at 1 83 -1 84 ; M cGu ire v. Co m m is si on er, 77 T.C. 76 5, 7 79 -7 80 (19 81 ). In s ho rt, n ei th er re sp on de ntno r th e Co urt i s co ns tra in edinth is cas e b y “ No Ch an ge ” le tt ers or c lo si ng no ti ces is su edto Mr. Cam pb el l fo r ta xabl e y ears no t b efo re the Co urt. See , e.g., Go ul d v . Co m m is si on er, 1 39 T.C. 41 8, 4 45 (20 12 ), aff’d, 5 52 Fed . App x. 2 50 (4t h C ir. 20 14 ); Ho ltv. Co m

m is si on er, T.C. Mem o. 1 99 9- 34 8; Kio urts is v. Co m m is si on er, T.C. Mem o. 1 99 6- 53 4. Acco rd in gl y , alt ho ug h M r. Cam pb el l was all owe d t o ex cl ud e h is Co as t Gu ardret ire m en t p ay fro m gro ss in co m e fo r ear li er t ax ab le y ears , pet it io ne rs m ay

no t ex cl ud e an y

po rti on of h is ret ire m en t p ay fro m gro ss in co m e fo r 20 11 . To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red un de r Ru le 15 5.