26 U.S.C. § 122 — Certain reduced uniformed services retirement pay

submitted 60 years ago by Pub. L. 89-365 to r/title-26-INTERNAL-REVENUE-CODE · 203 words · no verdicts yet

in plain englishAI-generated · not legal advice

When a military retiree gave up part of their retired pay to fund a survivor annuity, that given-up amount doesn't count as taxable income. Later, the annuity payments themselves aren't taxed either, until the payments received add up to what the retiree originally put in — called the "consideration for the contract," which includes both the pre-1966 pay reductions and any deposits made under specific title 10 sections.

This section excludes certain military retirement-related amounts from taxable income. (a) General rule. If a member or former member of the uniformed services had their retired or retainer pay reduced under chapter 73 of title 10 (the law governing survivor benefit elections), that reduced amount is not counted as gross income. (b) Special rule. Paragraph (1) says that for that same person, all retired or retainer pay they receive is excluded from gross income until the total excluded equals their "consideration for the contract" — but only to the extent those amounts would otherwise have been taxable. Paragraph (2) defines "consideration for the contract" (for this purpose and for section 72(n)) as the sum of: (A) the total amount by which their retired or retainer pay was reduced before January 1, 1966, because of a chapter 73 election; plus (B) any amounts they separately deposited under section 1438 or 1452(d) of title 10.

the actual law source: uscode.house.gov ↗public domain

(a) General rule

In the case of a member or former member of the uniformed services of the United States, gross income does not include the amount of any reduction in his retired or retainer pay pursuant to the provisions of chapter 73 of title 10, United States Code.

(b) Special rule

(1) Amount excluded from gross income

In the case of any individual referred to in subsection (a), all amounts received as retired or retainer pay shall be excluded from gross income until there has been so excluded an amount equal to the consideration for the contract. The preceding sentence shall apply only to the extent that the amounts received would, but for such sentence, be includible in gross income.

(2) Consideration for the contract

For purposes of paragraph (1) and section 72(n), the term “consideration for the contract” means, in respect of any individual, the sum of—

(A)

the total amount of the reductions before January 1, 1966, in his retired or retainer pay by reason of an election under chapter 73 of title 10 of the United States Code, and

(B)

any amounts deposited at any time by him pursuant to section 1438 or 1452(d) of such title 10.

Source credit: (Added Pub. L. 89–365, § 1(a)(1), Mar. 8, 1966, 80 Stat. 32; amended Pub. L. 93–406, title II, §§ 2005(c)(10), 2007(a), (b)(1), Sept. 2, 1974, 88 Stat. 992, 994; Pub. L. 113–295, div. A, title II, § 221(a)(21), Dec. 19, 2014, 128 Stat. 4040.)

history & why it existsrecord from the source credit

1966Enacted · Pub. L. 89-365 · 80 Stat. 32
1974Amended · Pub. L. 93-406 · 88 Stat. 992, 994
2014Amended · Pub. L. 113-295 · 128 Stat. 4040

A history note hasn’t been published yet. The record shows enactment by Pub. L. 89-365 on 1966-03-08.

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