Aubrey Brown is a decorated veteran of the Vietnam War. As a result of his exposure to Agent Orange during the war, Aubrey developed lung cancer and is unable to work. He received $12,000 of Social Security disability payments in the current year. He reasons that the payments should be excluded from his gross income because the payments are compensation for the physical injury he suffered as a result of his service in the armed forces. Is Aubrey correct? Explain. Solution Aubrey Brown developed lung cancer and is unable to work as a result of his exposure to Agent Orange during the war, Aubrey developed lung cancer and is unable to work. He received $12,000 of Social Security disability payments in the current year. His contention that the payments should be excluded from his gross income because the payments are compensation for the physical injury he suffered as a result of his service in the armed forces is true within the perview of law and taxation rules. These compensations are excluded from the taxable income and are hence not included to calculate the tax payable by Aubrey brown .