Mr. Top received $25,000 in disability payments while he was recuperating from heart surgery. Mr. Top, age 65, is an employee with a large corporation providing general business consulting services. The corporation has always paid for the disability insurance of its employees. Mr. Top telecommutes and works out of the home. From further conversations with the client, you discover that only $10,000 of the disability payments received by Mr. Top arise from a disability policy paid for by his employer under a group disability policy. The remaining $15,000 was paid on a separate policy that Mr. Top purchased some time ago. Mr. Top has been paying semiannual premiums on the separate individual policy. You are asked to prepare Mr. Top's return.
a. Do the Treasury regulations provide further guidance in this situation?
b. Do the Treasury regulations help to refine or add to the initial research question(s)?
c. Do the regulations adequately address the research question? If so, what are your conclusions, and on what are they based?