Rev. Rul. 78-46

Section 701(a) of the Public Safety Officers' Benefits Act of 1976, Pub. L. No. 94-430, 94th Cong., 2d Sess. (September 29, 1976), provides that when the Law Enforcement Assistance Administration determines that a public safety officer has died as the direct and proximate result of a personal injury sustained in the line of duty, the Administration shall pay a benefit to certain surviving dependents. The benefit paid to the surviving dependents is excludable from gross income under section 104(a) of the Internal Revenue Code of 1954. See Rev. Rul. 77-235, 1977-2 C.B. 45.

Section 701(b) of the Act provides that whenever the Administration determines, upon a showing of need and prior to taking final action, that the death of a public safety officer is one with respect to which a benefit will probably be paid, the Administration may pay an interim benefit not exceeding $3,000 to the person entitled to receive a benefit under section 701(a). Section 701(c) provides that the amount of an interim benefit under section 701(b) shall be deducted from the amount of any final benefit paid to such person.

Section 701(d) of the Act provides that if there is no final benefit paid, the recipient of any interim benefit under section 701(b) shall be liable for repayment of such amount. However, the Administration may waive all or part of such repayment, considering for this purpose the hardship that would result from such repayment.

Held, when the Administration waives repayment of an interim benefit payment, or any portion thereof, because of a showing of an economic hardship, the discharge of the liability for repayment is in the nature of a relief payment made for the promotion of the general welfare, and is not includible in the gross income of the recipient for Federal income tax purposes.