Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-85

1955-1 C.B. 15

Sec. 105

Caution: Distinguished by Rev. Rul. 58-178

IRS Headnote

The wages received by a civilian employee of the United States Government for a period during which he is absent from work on account of personal injuries or sickness are excludable from his gross income to the extent provided in section 105(d) of the Internal Revenue Code of 1954. If the absence is, in fact, due to personal injury or illness, the manner in which the absence is reflected in the records of the employing agency will not be determinative of the right of the employee to the benefit of the exclusion under such section.

Full Text

Rev. Rul. 55-85

Advice has been requested whether the provisions of section 105(d) of the Internal Revenue Code of 1954 are applicable to the compensation received by a civilian employee of the United States Government for a period during which the employee is absent from work on account of personal injuries or sickness.

Section 105 of the 1954 Code, relating to amounts received under accident and health plans, provides in part as follows:

(a) AMOUNTS ATTRIBUTABLE TO EMPLOYER CONTRIBUTIONS.-Except as otherwise provided in this section, amounts received by an employee through accident or health insurance for personal injuries or sickness shall be included in gross income to the extent such amounts (1) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (2) are paid by the employer.

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(d) WAGE CONTINUATION PLANS.-Gross income does not include amounts referred to in subsection (a) if such amounts constitute wages or payments in lieu of wages for a period during which the employee is absent from work on account of personal injuries or sickness; but this subsection shall not apply to the extent that such amounts exceed a weekly rate of $100. In the case of a period during which the employee is absent from work on account of sickness, the preceding sentence shall not apply to amounts attributable to the first 7 calendar days in such period unless the employee is hospitalized on account of sickness for at least one day during such period. If such amounts are not paid on the basis of a weekly pay period, the Secretary or his delegate shall by regulations prescribe the method of determining the weekly rate at which such amounts are paid.

Amounts received under an accident or health plan for employees are to be treated as amounts received through accident or health insurance for the purpose of section 105 of the Code and the provisions of such section are applicable with respect to taxable years beginning after December 31, 1953, and ending after August 16, 1954. Thus, in the case of a calendar-year taxpayer such provisions would apply to amounts received on and after January 1, 1954.

The various Acts of Congress which grant leave with pay to civilian employees of the United States Government for periods of absence on account of personal injuries or sickness constitute accident or health plans within the meaning of section 105 of the Code. Consequently, the wages received by such an employee for a period during which he is absent from work on account of personal injuries or sickness are excludable from his gross income to the extent provided in section 105(d) of the Code. If the absence is, in fact, due to personal injury or illness, the manner in which the absence is reflected in the records of the employing agency will not be determinative of the right of the employee to the benefit of the exclusion under such section