Internal Revenue Service
Revenue Ruling
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smRev. Rul. 58-91
1958-1 C.B. 49
Sec. 105
IRS Headnote
Provisions of a state statute, or of bylaws and regulations of a board of education, authorizing payments in lieu of wages to a teacher on sabbatical leave for the restoration of health constitute a wage continuation plan. The amounts received under such a plan for a period during which the teacher is, in fact, incapacitated on account of personal injuries or sickness may be excluded from gross income, subject to other limitations of section 105(d) of the Internal Revenue Code of 1954, providing such periods are not included within his normal summer, Christmas, Easter or other vacation period.
Full Text
Rev. Rul. 58-91
Advice is requested whether amounts which a public school teacher receives while on sabbatical leave for the purpose of rest and recuperation may be excluded from gross income under section 105(d) of the Internal Revenue Code of 1954.
In the instant case, the bylaws and regulations of a board of education provide that sabbatical leave for the restoration of health may be granted to teachers who meet certain conditions. While on such leave, the teacher is paid wages at a reduced rate. Sabbatical leave for the restoration of health is granted (when other requirements are met) upon the application of the teacher, submission of a medical report by his physician, approval of the school medical director, and the approval of the associate superintendent in charge of personnel. A person on sabbatical leave for the restoration of health may not resume his duties, prior to the expiration of the sabbatical leave, without the approval of the superintendent of schools, nor may he engage in any gainful occupation or in study for another trade or profession.
Under the provisions of section 105(d) of the Code, wages or payments in lieu of wages received by an employee pursuant to the provisions of a wage continuation plan for a period during which the employee is absent from work on account of personal injuries or sickness are excludable from gross income subject to the following limitations: (1) the exclusion does not apply to the extent that the amounts received exceed a weekly rate of $100; and (2) if the absence is due to sickness (as distinguished from injury), the exclusion does not apply to amounts attributable to the first seven calendar days of the period of absence unless the employee is hospitalized on account of sickness for at least one day during the period of absence.
Section 1.105-4(a)(2)(i) of the Income Tax Regulations provides that section 105(d) of the Code is applicable only if the wages or payments in lieu of wages are paid pursuant to a wage continuation plan; that the term `wage continuation plan' means an accident or health plan under which wages, or payments in lieu of wages, are paid to an employee for a period during which he is absence from work on account of personal injury or sickness; and that such term includes a plan under which wages are paid to an employee who is absent from work on account of personal injury or sickness, even though the plan also provides that wages may be paid to an employee who is absent from work for reasons other than a personal injury or sickness.
Section 1.105-4(a)(3) of the Income Tax Regulations provides that section 105(d) of the Code applies only to amounts attributable to periods during which the employee would be at work were it not for a personal injury or sickness and that a teacher, who becomes sick during the summer or other vacation period when he is not expected to teach, is not entitled to any exclusion under section 105(d) of the Code for the summer or vacation period. See also Rev. Rul. 57-360, C.B. 1957-2, 97.
In accordance with section 1.105-4(a)(4) of the Income Tax Regulations, a period of absence from work shall commence the moment the employee first becomes absent from work and shall end the moment the employee first returns to work. However, the exclusion provided under section 105(d) of the Code is applicable only to payments attributable to a period of absence from work which is due to a personal injury or sickness and to payments attributable to a period when the employee would have been at work but for such personal injury or sickness.
Accordingly, it is held that provisions of a state statute, or of by laws and regulations of a board of education, authorizing payments in lieu of wages to a teacher on sabbatical leave for the restoration of health constitute a wage continuation plan. The amounts received under such plan for periods during which the teacher is, in fact, incapacitated on account of personal injuries or sickness may be excluded from gross income, subject to other limitations of section 105(d) of the Code, providing such periods are not included within his normal summer, Christmas, Easter, or other vacation period.