Clemens v. Commissioner
Clemens v. Commissioner, T.C. Memo. 1989-205, decides whether a Port Authority police officer could exclude sick-leave pay under section 104(a)(1). The pay came from a labor agreement, not from a workers' compensation statute. The case does not classify building components or depreciable equipment.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- T.C. Memo. 1989-205 holds that sick-leave pay under a labor contract is not excluded by section 104(a)(1).
- The petitioner was a Port Authority police officer injured in the line of duty in 1983.
- The case does not decide the class of any building component or piece of equipment.
- Educational information, not tax advice.
Case record
- Court
- U.S. Tax Court
- Citation
- T.C. Memo. 1989-205, 57 T.C.M. (CCH) 286
- Decision date
- 1989-05-01
- Facts
- George E. Clemens III was a police officer for the Port Authority of New York and New Jersey, living in Deer Park, New York. On September 30, 1983, he was injured in the line of duty and was unable to work until January 19, 1984. During that period he received sick-leave pay under a Patrolmen's Benevolent Association memorandum of agreement. He also received a workers' compensation award that was not on his Form W-2. The Commissioner issued a notice of deficiency of $1,748 for 1983. Clemens claimed that sick-leave pay of $7,831.84 was excluded from income.
- Issue
- Whether sick-leave payments received under the labor agreement were amounts received under a statute in the nature of a workmen's compensation act, and therefore excluded from gross income under section 104(a)(1).
- Holding
- The exclusion was not allowed. The payments were made under the collective-bargaining agreement. A labor contract is not a statute in the nature of a workmen's compensation act. The separate workers' compensation award, which was not reported on the W-2, was not the amount in dispute.
- Reasoning
- Section 104(a)(1) excludes amounts received under a workmen's compensation act, or under a statute in the nature of such an act, for personal injuries or sickness. Sick pay that an employer owes because a contract says so is wages, even when the employee was hurt on the job. The court compared the Port Authority arrangement with earlier cases in which the pay was traced to a labor contract rather than to a compensation statute. The pay stubs in the record showed net sick-leave payments, and the claimed exclusion did not match a statutory benefit.
- Relevance to cost segregation
- This is a real Tax Court memorandum under the inventory caption. It is about wage exclusion, not depreciation. It does not mention buildings, recovery periods, or cost segregation. A different spelling, Clements v. Commissioner, T.C. Memo. 1981-530, involves construction equipment and is not this case. Clemons v. Commissioner, T.C. Memo. 1979-273, is also a different taxpayer. Classification questions still go to Hospital Corporation of America, Whiteco, and Scott Paper.
Clemens v. Commissioner is a real Tax Court case. The opinion that matches this caption is T.C. Memo. 1989-205, also reported at 57 T.C.M. (CCH) 286. Judge Wright decided it. The issue is the exclusion for workmen's compensation under section 104(a)(1). It is not a cost-segregation case, and this page does not rewrite it into one.
George E. Clemens III was a police officer employed by the Port Authority of New York and New Jersey. He lived in Deer Park, New York. On September 30, 1983, he was injured while on duty. He could not work until January 19, 1984. During that absence he was paid sick leave under a memorandum of agreement between the Port Authority and the Patrolmen's Benevolent Association. He also received a workers' compensation award of $3,315 that was not included on his Form W-2.
The Commissioner determined a deficiency of $1,748 for 1983. The notice was dated April 1, 1985. Clemens's position was that sick-leave pay should be excluded from gross income because he was hurt in the line of duty. The amount he treated as excluded was $7,831.84. Pay records in the case listed net sick-leave payments that totaled $5,665.87. The court had to decide whether those contract payments were received under a statute in the nature of a workmen's compensation act.
Section 104(a)(1) excludes compensation for personal injuries or sickness if it is received under a workmen's compensation act, or under a statute in the nature of such an act. The statute requirement is the point of the case. An employer can agree, in a labor contract, to keep paying an injured worker. That agreement may be fair. It is still a contract. The Tax Court has treated contract sick pay as taxable when no statute, as opposed to a bargaining agreement, is the source of the payment. The Port Authority payments fell on the contract side of that line, so the exclusion was denied.
Nothing in that reasoning classifies property. The opinion does not discuss section 167, section 168, a recovery period, a structural component, or a police facility. It does not hold that any asset used by a police department is 5-year property or 39-year property. A cost-segregation report that needs support for an asset class cannot cite T.C. Memo. 1989-205 for that class.
Similar names are a separate trap. Clements v. Commissioner, T.C. Memo. 1981-530, adds a "t" and concerns depreciation of construction equipment. Clemons v. Commissioner, T.C. Memo. 1979-273, is another taxpayer. A later memorandum under this same caption, Clemens v. Commissioner, 64 T.C.M. 351 (1992), is a conservation-easement valuation, not a depreciation case. This page's holding is only the 1989 sick-leave memorandum. Substituting another opinion would change the issue, so it is not done here.
Readers who came to this URL looking for classification authority should continue to Hospital Corporation of America v. Commissioner, Whiteco Industries, Inc. v. Commissioner, and Scott Paper Co. v. Commissioner. Those decisions address personal property and structural components. This decision addresses whether contract sick pay is excluded from wages.
CostSeg SI describes extraction, classification, estimation, and review as a proposed Super Intelligence workflow. A wage-exclusion case is not an example of that workflow, and this site does not claim those steps are an operating system. Educational information, not tax advice.
What the record shows
The injury date, the return-to-work date, the deficiency amount, the claimed exclusion, the net pay-stub total, and the separate workers' compensation award are taken from the memorandum that was opened. The workers' compensation award itself was not on the W-2 and was not the disputed exclusion. The dispute was the sick-leave pay required by the labor agreement.
The legal test is narrow. Line-of-duty injury is not enough. The payment must be traced to a workmen's compensation statute, or to a statute in the nature of one. A collective-bargaining memorandum did not meet that test in this case.
What not to cite it for
Do not cite Clemens for a building class, a land-improvement class, or a useful life. Do not cite it for the depreciation of vehicles, weapons, or station equipment. Those questions are answered, if at all, by the MACRS statute, the class-life revenue procedure, and the structural-component cases.
Do not merge this memorandum with Clements (1981) or Clemons (1979). If a file uses one of those spellings, open that opinion separately and cite it under its own name.
Verification. Opened the Tax Court memorandum text reported as T.C. Memo. 1989-205, 57 T.C.M. (CCH) 286 (Judge Wright). The date used here is the memo date carried in the research register. The opinion that was read is the sick-leave case, not a depreciation case.
Sources
- 1Clemens v. Commissioner, T.C. Memo. 1989-205, 57 T.C.M. (CCH) 286(opens in a new tab)
Sick-leave exclusion under section 104(a)(1). Not a depreciation case.
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