The taxpayer in the case of Palsgaard and Kelley v. Commissioner, TC Memo 2018-82 argued that his social security disability insurance (SSDI) benefits should not taxable under IRC §104. But the Tax Court did not agree with the taxpayer.

The opinion noted that the taxpayer had been disabled by a physical injury:

Petitioner had a successful medical practice in California until March 2009, when she suffered a physical injury that left her disabled within the meaning of section 72(m)(7). This injury resulted in a long-lasting physical impairment of indefinite [*3] duration that substantially interfered with her ability to engage in gainful employment. She retired from the practice of medicine shortly thereafter.