Internal Revenue Service
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 Rev. Rul. 77-15

1977-1 C.B. 26

Section 105

IRS Headnote

Sick pay; Federal disability retiree employed by Postal Service. For periods prior to 1976, a Federal employee who retired on disability (including members of the Armed Forces on the retired list for physical disability) was not "absent from work" for purposes of the sick pay exclusion when that individual performed services as an employee of the U.S. Postal Service.

Full Text

Rev. Rul. 77-15

Advice has been requested whether an individual retired for disability from an agency of the United States Government (including members of the Armed Forces of the United States on the retired list for physical disability) is "absent from work" for purposes of the sick pay exclusion provided by section 105(d) of the Internal Revenue Code of 1954 when that individual performs services as an employee of the United States Postal Service in 1975 and earlier years.

For periods before January 1, 1976, section 105(d) of the Code provides, in part, that, subject to certain limitations, gross income does not include amounts received as 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.

Section 1.105-4(a)(5) of the Income Tax Regulations provides, in part, that an employee "is not absent from work when he performs substantial services for his employer, even though they are performed at a place other than his usual place of employment."

Rev. Rul. 58-599, 1958-2 C.B. 45, holds that a member of the Armed Forces on the retired list for physical disability is no longer "absent from work" for purposes of the exclusion provided by section 105(d) of the Code when the member performs services as an employee of the United States, whether such services are performed in the same department or in another department, agency, or branch of the United States Government.

The Postal Reorganization Act, Pub. L. No. 91-375, 91st Cong., 2d Sess. (August 12, 1970), created the United States Postal Service as an independent establishment of the executive branch of the Government of the United States (39 U.S.C. section 201 (1970)), to be operated as a service to the people by the Government of the United States (39 U.S.C. section 101(a)(1970)). Thus, an officer or employee of the United States Postal Service is an employee of the Government of the United States and, therefore, comes within the purview of Rev. Rul. 58-599.

Accordingly, an individual retired for disability from an agency of the United States Government (including members of the Armed Forces of the United States on the retired list for physical disability) is no longer "absent from work" for purposes of the sick pay exclusion provided by section 105(d) of the Code when that individual performs services as an employee of the United States Postal Service for which payments were received in 1975 and earlier years.

For the exclusion of disability payments received subsequent to December 31, 1975, see section 105(d) of the Code as amended by section 505(a), (c) and (d) of the Tax Reform Act of 1976, Pub. L. No. 94-455, 94th Cong., 2d Sess. (October 4, 1976) [1976-3 C.B. (Vol. 1) 42].