Tax News

CCH (cch.taxgroup.com) reports:

The IRS has ruled that payments made by the U.S. Department of Veterans Affairs under the Compensated Work Therapy (CWT) Program are exempt from federal income tax as veterans' benefits. The ruling reflects the IRS's acquiescence (TAXDAY, 2007/10/29, I.5) to the Tax Court's decision in R. Wallace , 128 TC 132, Dec. 56,899 (TAXDAY, 2007/04/17, J.1), that payments received under the CWT Program constitute nontaxable veterans' benefit under 38 U.S.C. §5301 (as cross-referenced in Code Sec. 140(a)(3)).
The IRS noted that the legislative history for Code Sec. 134, which provides an exclusion from gross income for qualified military benefits, indicates that veterans' benefits under 38 U.S.C. §3101 (now 38 U.S.C. §5301) constitute qualified military benefits. The IRS further ruled that, because payments made under the CWT Program are exempt from federal income tax, they are not required to be reported on an information return.
Rev. Rul. 65-18, 1965-1 CB 32, is revoked and Rev. Rul. 72-605, 1972-2 CB 35, is amplified.
Rev. Rul. 2007-69, 2007FED ¶46,715
Other References:
Code Sec. 61
CCH Reference - 2007FED ¶5504.027
CCH Reference - 2007FED ¶5504.74
CCH Reference - 2007FED ¶5504.785
CCH Reference - 2007FED ¶5507.2736
Code Sec. 134
CCH Reference - 2007FED ¶7501.01
Code Sec. 140
Code Sec. 3401
CCH Reference - 2007FED ¶33,538.5575
Code Sec. 6041
CCH Reference - 2007FED ¶35,836.52
Tax Research Consultant
CCH Reference - TRC INDIV: 33,360
CCH Reference - TRC COMPEN: 6,608