Jacqueline Medina - Page 7
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amount. Respondent issued petitioner a notice of deficiency in
which respondent determined that petitioner failed to report the
$58,000 amount on her Federal income tax return.
1. Excludability of the $58,000 Amount4
Section 61(a) provides that “gross income means all income
from whatever source derived” except as otherwise provided.
Section 104(a)(2) excludes from gross income “the amount of any
damages (other than punitive damages) received (whether by suit
or agreement and whether as lump sums or as periodic payments) on
account of personal physical injuries or physical sickness”.
The term “damages received” means an amount received “through
prosecution of a legal suit or action based upon tort or tort
type rights, or through a settlement agreement entered into in
lieu of such prosecution.” Sec. 1.104-1(c), Income Tax Regs.
The flush language of section 104(a) further provides that
“emotional distress shall not be treated as a physical injury or
physical sickness” for purposes of section 104(a)(2). “[T]he
4Sec. 7491(a) places upon the Commissioner the burden of
proof with respect to any factual issue relevant to a taxpayer's
liability for tax if the taxpayer proves that she maintained
adequate records, satisfied applicable substantiation
requirements, cooperated with the Commissioner, and introduced
during the Court proceeding credible evidence on the factual
issue. See Prince v. Commissioner, T.C. Memo. 2003-247.
Petitioner did not assert nor present evidence or argument that
she satisfied the requirements of sec. 7491(a). However, the
resolution of this issue does not depend on which party has the
burden of proof. We resolve this issue on the preponderance of
the evidence in the record.
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