                         T.C. Memo. 1999-373



                       UNITED STATES TAX COURT



                   JOHN EDWARD TUCKER, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12129-98.              Filed November 10, 1999.



     John Edward Tucker, pro se.

     Thomas A. Vidano, for respondent.


                          MEMORANDUM OPINION


     GOLDBERG, Special Trial Judge:    Respondent determined a

deficiency in petitioner's 1995 Federal income tax in the amount

of $2,670.    Unless otherwise indicated, section references are to

the Internal Revenue Code in effect for the year in issue.
                               - 2 -

     After a concession by petitioner,1 the issue for decision is

whether payments in the amount of $16,221.56 made by a school

district to petitioner in his capacity as a Junior Reserve

Officers' Training Corps (JROTC) instructor are excludable from

gross income for the 1995 tax year.

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   At the time the petition

was filed, petitioner resided in Anaheim, California.

     Petitioner retired from the U.S. Army as a First Sergeant in

1977 and worked as a JROTC instructor for the Anaheim Union High

School District (school district) in 1995.   Petitioner has been

active in JROTC programs for the last 15 years.

     In 1995 petitioner received $33,175.23 from the school

district, and his spouse received wage income in the amount of

$16,075 from Cal State University Foundation for a total of

$49,250.23.   Petitioner and his spouse reported a total of

$33,028.67 of wage income on their 1995 Federal tax return.2




     1
          Petitioner concedes that he and his spouse received
interest in the amount of $35 from the Orange County Teachers
Federal Credit Union in 1995, which was not reported as income on
their joint 1995 Federal tax return.
     2
          Petitioner also received $13,776 in retirement
distributions in 1995, which amount petitioner duly reported on
his 1995 Federal income tax return.
                                 - 3 -

Petitioner excluded certain "military allowances" from gross

income for the 1995 tax year in the amount of $16,221.56.

       In a notice of deficiency dated April 8, 1998, respondent

determined that the $16,221.56 amount is includable in

petitioner's 1995 taxable income.    This amount represents

petitioner's purported 1995 "allowance" exclusions from his JROTC

income.    The inclusion of this amount results in computational

adjustments to petitioner's medical and miscellaneous deductions.

       Petitioner contends that he is entitled to exclude

$16,221.56 of JROTC income from gross income for the 1995 tax

year pursuant to 10 U.S.C. section 2031(d) and section 134.

       Gross income includes all income from whatever source

derived.    See sec. 61.   Military pay received by members of the

U.S. Armed Forces is generally includable in gross income.     See

sec. 1.61-2(a)(1), Income Tax Regs.

       Congress may specifically exempt certain items from

inclusion in gross income.    See Commissioner v. Glenshaw Glass

Co., 348 U.S. 426, 430 (1955).    Certain military compensation,

such as compensation received by members of the U.S. Armed Forces

serving in combat zones, is excluded from gross income.      See sec.

112.    Additionally, military subsistence and uniform allowances

and other amounts received as commutation of quarters are

excluded from gross income.    See sec. 1.61-2(b), Income Tax Regs.
                              - 4 -

     The Reserve Officers' Training Corps Vitalization Act of

1964, Pub. L. 88-647, sec. 101, 78 Stat. 1063 (codified as

amended at 10 U.S.C. section 2031 (1994)) provided for the

establishment of JROTC units at public and private schools.

Retired commissioned or noncommissioned officers may serve as

instructors and administrators in JROTC units pursuant to 10

U.S.C. section 2031(d) which states:

     (d) Instead of, or in addition to, detailing officers
     and noncommissioned officers on active duty * * * the
     Secretary of the military department concerned may
     authorize qualified institutions to employ, as
     administrators and instructors in the program, retired
     officers and noncommissioned officers * * * whose
     qualifications are approved by the Secretary and the
     institution concerned and who request such employment,
     subject to the following:
          (1) A retired member so employed is entitled to
     receive the member's retired or retainer pay without
     reduction by reason of any additional amount paid to
     the member by the institution concerned. In the case
     of payment of any such additional amount by the
     institution concerned, the Secretary of the military
     department concerned shall pay to that institution the
     amount equal to one-half of the amount paid to the
     retired member by the institution for any period, up to
     a maximum of one-half of the difference between the
     member's retired or retainer pay for that period and
     the active duty pay and the allowances which the member
     would have received for that period if on active duty.
     Notwithstanding the limitation in the preceding
     sentence, the Secretary concerned may pay to the
     institution more than one-half of the additional amount
     paid to the retired member by the institution if (as
     determined by the Secretary) the institution is in an
     educationally and economically deprived area and the
     Secretary determines that such action is in the
     national interest. Payments by the Secretary concerned
     under this paragraph shall be made from funds
     appropriated for that purpose.
          (2) Notwithstanding any other provision of law,
     such a retired member is not, while so employed,
                                - 5 -

     considered to be on active duty or inactive duty
     training for any purpose.


     This Court has held that retired military personnel may not

rely on 10 U.S.C. section 2031(d) to exclude income received as a

JROTC instructor from gross income.     See Lyle v. Commissioner, 76

T.C. 668, 675-676 (1981), affd. without published opinion 673

F.2d 1326 (5th Cir. 1982).    In Lyle, we based our holding on the

following finding of facts:   (1) The plain language of 10 U.S.C.

section 2031(d) does not authorize an exclusion from gross income

for amounts paid to JROTC instructors not on active duty; and (2)

JROTC instructors are employed by the local school district and

are paid for services, partly funded by the Federal Government,

rendered to that school district.   See id.

     Petitioner contends that this case is factually different

from Lyle because in this case the Federal Government reimbursed

the school district 100 percent of the school district's payments

to petitioner rather than only 50 percent as in Lyle.

     Petitioner is correct is asserting that the amount of

Government reimbursement in Lyle differs from the amount of

reimbursement in this case.   Title 10 U.S.C. section 2031(d) was

amended in 1992 to allow the Secretary to reimburse school

districts located in "educationally and economically deprived"

areas up to 100 percent of amounts paid for a JROTC instructor's
                                - 6 -

salary.3   This statutory change did not, however, result in

payments to JROTC instructors, which would otherwise be

includable in gross income pursuant to section 61, becoming

excludable from gross income.

     In addition to the above arguments, petitioner contends that

a portion of his income from the JROTC program is excludable from

gross income because it came directly from the Federal government

and only passed through the school district.   Petitioner contends

that because the school district is reimbursed for his wages and

because the rate at which petitioner is paid by the school

district is measured by the rate of pay he would otherwise have

received if he were on active duty, petitioner's income from the

school district should be treated the same as active duty pay and

be partially excludable from gross income.

     Petitioner's contract with the school district, titled:

APPLICATION AND CONTRACT FOR ESTABLISHMENT OF A JUNIOR RESERVE

OFFICERS' TRAINING CORPS UNIT, reads in pertinent part:

     e. To pay retired personnel employed pursuant to
     paragraph 2d above:

          (1) As a minimum, an amount equal to the
     difference between their retired pay and the active
     duty pay and allowances, excluding hazardous duty pay,
     that they would receive if ordered to active duty for
     that period of time during which such personnel perform
     duties in direct support of Junior ROTC. This should


     3
          Title 10 U.S.C. 2031(d) was amended by the National
Defense Act for Fiscal Year 1993, Pub. L. 102-484, sec. 533(e),
106 Stat. 2315.
                               - 7 -

     not be considered an attempt to cap or limit the amount
     of pay that may be agreed upon between the individual
     Junior ROTC instructor and the instructor's employer,
     however, the Army will pay no more than the computed
     Army formula. Salary will be recomputed as military
     pay raises and/or cost of living increases occur.


It is clear from the contract language that petitioner was able

to negotiate his own rate of pay and that petitioner's active

duty rate of pay was only a "minimum" guideline.   Petitioner

conceded at trial that each school district contract was

different.

     In Lyle v. Commissioner, supra, this Court stated that,

"fairly construed", 10 U.S.C. section 2031(d) does "no more than

establish a formula" for calculating the minimum amount of

compensation a given school district would pay a JROTC

instructor.   See Lyle v. Commissioner, supra at 675.    Regardless

of the reimbursement arrangement or the scale by which his income

was measured, it is clear that petitioner received income from

the school district as wages for his work as a JROTC instructor.

Simply put, if petitioner did not work as a JROTC instructor, the

school district would not have paid him; petitioner's income from

the school district was for services rendered, and, thus, it is

not excludable from income.

     It is undisputed in the record that petitioner retired from

the U.S. Army in 1977 and was not on active duty in 1995.

Additionally, 10 U.S.C. section 2031(d) clearly states that a
                              - 8 -

JROTC instructor "is not, while so employed, considered to be on

active duty * * * for any purpose".

     Petitioner also relies on section 134 to support an

exclusion of a portion of his school district income from gross

income and contends that our holding in Lyle v. Commissioner,

supra, "was in part superseded by" section 134.   Section 134

provides in pertinent part:

          (a) General Rule.--Gross income shall not include
     any qualified military benefit.

          (b) Qualified Military Benefit.--For purposes of
     this section--

               (1) In general.--The term "qualified
          military benefit" means any allowance or in-kind
          benefit (other than personal use of a vehicle)
          which--

                    (A) is received by any member or former
               member of the uniformed services of the
               United States or any dependent of such member
               by reason of such member's status or service
               as a member of such uniformed services, and

                    (B) was excludable from gross income on
               September 9, 1986, under any provision of
               law, regulation, or administrative practice
               which was in effect on such date (other than
               a provision of this title).

               (2) No other benefit to be excludable except
          as provided by this title.--Notwithstanding any
          other provision of law, no benefit shall be
          treated as qualified military benefit unless such
          benefit--

                    (A) is a benefit described in paragraph
               (1), or

                    (B) is excludable from gross income
               under this title without regard to any
                                - 9 -

                 provision of law which is not contained in a
                 revenue Act.

       Section 134 excludes only a "qualified military benefit"

from gross income, which is defined as a benefit received by a

taxpayer by reason of that taxpayer's status as a member or

former member of the uniformed services and which was excludable

from gross income on September 9, 1986.    See sec. 134(b).

       As mentioned above, this Court has already concluded that

Congress did not intend to exclude payments received through a

JROTC program from gross income under 10 U.S.C. section 2031(d).

See Lyle v. Commissioner, supra at 675-676.    Petitioner has made

no other argument which would indicate that payments received

from a JROTC program constituted a qualified military benefit and

were otherwise excludable from gross income on September 9, 1986,

pursuant to section 134(b)(1)(B).

       Additionally, this Court has found that a taxpayer's

entitlement to income from the JROTC program is not received by

reason of that taxpayer's status as a member or former member of

the uniformed services, but rather is received as compensation

for services rendered.    See Lyle v. Commissioner, supra at 675-

676.

       On the basis of the record, we find that petitioner was

employed by the Anaheim Union School District and received

compensation from the school district in 1995 for his services as

a JROTC instructor.    We further find that petitioner's income
                              - 10 -

from the school district did not qualify as a "qualified military

benefit".   Accordingly, we hold that no portion of petitioner's

income from the school district was excludable from his 1995

income.   Respondent is sustained on this issue.

     To reflect the foregoing,

                                         Decision will be entered

                                    for respondent.
