- 3 -Petitioner served in the U.S. Air Force for 20 years beforeretiring as a master sergeant. For his service petitioner isentitled to military retirement pay (MRP). For 2004 the grossamount petitioner was entitled to receive as his MRP was $1,322per month.
However, petitioner executed a VeteransAdministration waiver pursuant to which he waived receipt of $205each month.
The Defense Finance and Accounting Service (DFAS) is theagency responsible for disbursing petitioner’s MRP. For eachmonth of 2004 the DFAS withheld approximately $716 frompetitioner’s MRP, $461 of which was subject to a Texas Statecourt garnishment order for child support, and deposited thebalance into petitioner’s bank account. No withholdings weremade for Federal income taxes.
All amounts have been rounded to the nearest whole dollar.
Petitioner was entitled to both an MRP and disabilitybenefits from the Veterans Administration (VA). However,retirees are barred from receiving concurrent payments of bothMRP and VA disability benefits unless certain exceptions are met,including that the retiree have a VA disability rating of 50percent or more. 38 U.S.C. secs. 5304 and 5305 (2006); 10 U.S.C.sec. 1414 (2006). Petitioner stated at trial that his disabilityrating was 20 percent but he believed it should have been 40percent. Instead of receiving the full amount of the MRP that aretiree is entitled to, the retiree can file an election waivingreceipt of the portion of the MRP equal to the amount of the VAdisability benefit awarded. 38 U.S.C. sec. 5305. Presumably, itis advantageous for a retiree to file such a waiver because theVA disability benefit is excluded from gross income under sec.104(a) and (b) whereas the MRP constitutes taxable income.
Neither party addressed why Federal income taxes were notwithheld from petitioner’s MRP.