Board of Contract Appeals

                 General Services Administration

                      Washington, D.C. 20405





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                         November 1, 2001

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                         GSBCA 15666-RELO





                  In the Matter of PAUL M. DUDEK





     Paul M. Dudek, Jacksonville, FL, Claimant.



     Robert D. Brown, Deputy Director, Finance Center, United States Army Corps of

Engineers, Department of the Army, Millington, TN, appearing for Department of the Army.



DeGRAFF, Board Judge.



     Paul M. Dudek is an employee of the Department of Defense (DoD).  When DoD

transferred Mr. Dudek from one duty station to another for permanent duty, it reimbursed

him for some of his moving expenses.  DoD then paid Mr. Dudek an allowance to

compensate for the increased tax liability he incurred due to his receipt of the moving

expense reimbursements.  When DoD calculated the amount of Mr. Dudek's allowance for

his increased tax liability, it decided not to include in his earned income the amounts he

received from his wife's retirement income and from insurance proceeds, because both those

amounts were reported to the Internal Revenue Service (IRS) on IRS Forms 1099-R.  If DoD

had included those amounts in Mr. Dudek's earned income, it would have paid Mr. Dudek

a larger allowance.  Mr. Dudek asks us to review DoD's decision. 



     DoD correctly decided to exclude Mr. Dudek's wife's retirement income and the

insurance proceeds when it calculated the amount of the allowance it paid to compensate for

his increased tax liability.  The regulations that govern DoD's calculations explain that when

DoD determined the amount of Mr. Dudek's allowance, it could consider only earned income

reported on IRS Form W-2 and the net earnings from self-employment shown on Schedule

SE of IRS Form 1040.  JTR C16002; 41 CFR 302-11.5(h), -11.8(d)-(e) (2000).  Perhaps the

regulations could have been written differently.  We and DoD, however, must apply them as

written and in doing so, we see that amounts reported on the IRS Forms 1099-R cannot be

included in Mr. Dudek's earned income.  Contrary to Mr. Dudek's view, the procedures set

out in the regulations are not designed to reimburse an employee for all of the employee's

added tax liability.  In addition, the procedures cannot be adjusted to accommodate an

employee's unique circumstances.  We have considered several claims similar to Mr. Dudek's

and reached the same conclusion as we reach here.  Catherine S. Cunningham, GSBCA

15035-RELO, 00-1 BCA   30,807 (income reported on line 17 of IRS Form 1040); Linda R.

Drees, GSBCA 14436-RELO, 99-1 BCA   30,198 (income reported on IRS Form 1099-R);

William A. Lewis, GSBCA 14367-RELO, 98-1 BCA   29,532 (income reported on IRS Form

1099).  Because the amounts Mr. Dudek received from his wife's retirement income and from

insurance proceeds were reported to the IRS on IRS Forms 1099-R, DoD correctly decided

not to include those amounts in Mr. Dudek's earned income when it calculated the allowance

it paid to compensate for his increased tax liability.  The scope of our authority does not

include changing the regulations, as Mr. Dudek requests.









                                   ____________________________________

                                   MARTHA H. DeGRAFF

                                   Board Judge