26 U.S.C. § 122

Certain reduced uniformed services retirement pay

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(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 contractFor 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.(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.)Editorial NotesPrior Provisions

A prior section 122 was renumbered section 140 of this title.

Amendments

2014—Subsec. (b)(1). Pub. L. 113–295 struck out “after December 31, 1965,” after “all amounts received”.

1974—Subsec. (a). Pub. L. 93–406, § 2007(a), substituted “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” for “United States who has made an election under chapter 73 of title 10 of the United States Code to receive a reduced amount of retired or retainer pay, gross income does not include the amount of any reduction after December 31, 1965, in his retired or retainer pay by reason of such election”.

Subsec. (b)(2). Pub. L. 93–406, § 2005(c)(10), substituted “72(n)” for “72(o)”.

Subsec. (b)(2)(B). Pub. L. 93–406, § 2007(b)(1), inserted reference to section 1452(d) of title 10.

Statutory Notes and Related SubsidiariesEffective Date of 2014 Amendment

Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 1974 Amendment

Amendment by section 2005(c)(10) of Pub. L. 93–406 applicable only with respect to distributions or payments made after Dec. 31, 1973, in taxable years beginning after Dec. 31, 1973, see section 2005(d) of Pub. L. 93–406, set out as a note under section 402 of this title.

Pub. L. 93–406, title II, § 2007(c), Sept. 2, 1974, 88 Stat. 993, provided that: “The amendments made by this section [amending this section and sections 72, 101, and 2039 of this title] apply to taxable years ending on or after September 21, 1972. The amendments made by paragraphs (3) and (4) of subsection (b) [amending sections 101 and 2039 of this title] apply with respect to individuals dying on or after such date”.

Effective Date

Pub. L. 89–365, § 1(d), Mar. 10, 1966, 80 Stat. 33, provided that: “The amendments made by subsections (a) and (b) [enacting this section and amending section 72 of this title] shall apply with respect to taxable years ending after December 31, 1965. The amendment made by subsection (c) [amending section 101 of this title] shall apply with respect to individuals making an election under chapter 73 of title 10 of the United States Code who die after December 31, 1965.”

Notes of Decisions

Cited in 90 cases, 1948–2009 · leading case: Mill Ridge Coal Co. v. George D. Patterson, Dist. Dir. of Internal Revenue, 264 F.2d 713 (5th Cir. 1959).

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Mill Ridge Coal Co. v. George D. Patterson, Dist. Dir. of Internal Revenue, 264 F.2d 713 (5th Cir. 1959). · cites it 2× “Agreeing with appellee, therefore, that the taxpayer here, as in the Libson case, supra, is not “the taxpayer” within the meaning of 26 U.S.C.A. § 122 (b) (2) (C); and that under the undisputed facts and the findings in this case, the allowance of the deduction is forbidden by…”

Stanton Brewery v. Comm'r of Internal Revenue, 176 F.2d 573 (2d Cir. 1949). · cites it 2× “324 , § 1, 26 U.S.C.A. § 122 note. We may pass the point whether such a later statute may control the meaning of this earlier Act now already repealed since we think the intent, if any, revealed by the statute suggests the opposite conclusion.”

Nat'l Forge & Ordnance Co. v. United States, 151 F. Supp. 937 (Ct. Cl. 1957). · cites it 2× “The next question which the case presents is the proper computation of the excess profits tax for 1944, which section 122(a), (b) and (d) (6), 26 U.S. C.A. § 122(a, b), (d) (6), say must be deducted from the income of the second preceding taxable year before application of the…”

A. C. Willingham v. United States, 289 F.2d 283 (5th Cir. 1961). · cites it 2× “We held there “that the taxpayer here, as in the Libson case, supra, is not the ‘taxpayer’ within the meaning of 26 U.S.C.A. § 122 (b) (2) (C).” In the case before us we have, instead of a complete reorientation of business activity, substantially the same kind of business…”

John M. Trent & Lisa M. Trent v. Comm'r of Internal Revenue, 291 F.2d 669 (2d Cir. 1961). “” Section 122(d) (5) said that in computing such loss, deductions “not attributable to the operation of a trade or business regularly carried on by the taxpayer shall * * * be allowed only to the extent of the amount of the gross income not derived from such trade or business.”

Lloyd U. Noland, Jr., & Jane K. Noland v. Comm'r of Internal Revenue, 269 F.2d 108 (4th Cir. 1959). “Salary has been treated as business income within the meaning of § 122 of the Internal Revenue Code of 1939, 26 U.S.C.A. § 122 . Batzell v. Commissioner, 4 Cir.”

Leo Elwert v. United States, 231 F.2d 928 (9th Cir. 1956). “If this were true, the unreported income for 1949 could be wiped out, and, because of the carry-back provisions of 26 U.S.C. § 122 , the amount of taxable income for 1947 and 1948 could be affected.”

Philadelphia Park Amusement Co. v. United States, 126 F. Supp. 184 (Ct. Cl. 1954). “97 net loss for the year 1946, and taxpayer claimed a net operating loss carryback to 1944 and 1945 under section 122(b) of the Code, 26 U.S.C.A. § 122 (b), . On December 15,' 1947, the taxpayer filed a claim for refund of 1944 taxes in the amount of $6,087.”

Cent. Cuba Sugar Co. v. Comm'r of Internal Revenue. Comm'r of Internal Revenue v. Cent. Cuba Sugar Co, 198 F.2d 214 (2d Cir. 1952). “§§ 122(b)(1), 23(s), 26 U.S.C.A. §§ 122 (b)(1), 23(s). The Commissioner ruled that this could not be done, claiming that $300,000 of the claimed expense deductions should be allocated to its successor concern.”

Urban Redevelopment Corp. v. Comm'r of Internal Revenue, 294 F.2d 328 (4th Cir. 1961). “Code of 1939, § 122(b), 26 U.S.C.A. § 122 (b), and Int.Rev.Code of 1954, § 172(a) and (g), 26 U.”

Maloney v. Spencer, 172 F.2d 638 (9th Cir. 1949). “48, and that this loss entitled him to a net operating loss carry-back of this amount to his two last prior fiscal years within § 122 of the Internal Revenue Code, 26 U.S.C.A. § 122 . The deduction of the 1.”

Lewyt Corp. v. Comm'r of Internal Revenue, 215 F.2d 518 (2d Cir. 1954). “§ 23 (s), provided that in computing net income there should be allowed as a deduction (from gross income) the “net operating loss deduction” provided in § 122, 26 U.S.C.A. § 122 . Section 122(a) defines “ ‘net operating loss’ ” as “the excess of the deductions allowed by this…”

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— 26 U.S.C. § 122(b) — 2 cases

Bush Terminal Bldgs. Co. v. Comm'r of Internal Revenue, 204 F.2d 575 (2d Cir. 1953).

F. C. Donovan, Inc. v. United States, 159 F. Supp. 1 (D. Mass. 1958).

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