[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.105-3]

[Page 445-446]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.105-3  Payments unrelated to absence from work.

    Section 105(c) provides an exclusion from gross income with respect 
to the amounts referred to in section 105(a) to the extent that such 
amounts (a) constitute payments for the permanent

[[Page 446]]

loss or permanent loss of use of a member or function of the body, or 
the permanent disfigurement, of the taxpayer, his spouse, or a dependent 
(as defined in section 152), and (b) are computed with reference to the 
nature of the injury without regard to the period the employee is absent 
from work. Loss of use or disfigurement shall be considered permanent 
when it may reasonably be expected to continue for the life of the 
individual. For purposes of section 105(c), loss or loss of use of a 
member or function of the body includes the loss or loss of use of an 
appendage of the body, the loss of an eye, the loss of substantially all 
of the vision of an eye, and the loss of substantially all of the 
hearing in one or both ears. The term ``disfigurement'' shall be given a 
reasonable interpretation in the light of all the particular facts and 
circumstances. Section 105(c) does not apply if the amount of the 
benefits is determined by reference to the period the employee is absent 
from work. For example, if an employee is absent from work as a result 
of the loss of an arm, and under the accident and health plan 
established by his employer, he is to receive $125 a week so long as he 
is absent from work for a period not in excess of 52 weeks, section 
105(c) is not applicable to such payments. See, however, section 105(d) 
and Sec. 1.105-4. However, for purposes of section 105(c), it is 
immaterial whether an amount is paid in a lump sum or in installments. 
Section 105(c) does not apply to amounts which are treated as workmen's 
compensation under paragraph (b) of Sec. 1.104-1, or to amounts paid by 
reason of the death of the employee (see section 101).