-2-
Respondent determined a deficiency in petitioner's Federal
income tax of $14,441 for 2000 and an accuracy-related penalty of
$2,888 under section 6662(a). The issue for decision is whether
a $50,000 payment received by petitioner in 2000 is excludable
from gross income under section 104(a)(2).
Background
The stipulation of facts and the exhibits received into
evidence are incorporated herein by reference. Petitioner
resided in Los Angeles, California, at the time the petition was
filed.
Petitioner began working for Universal City Studios, Inc.
(Universal), on or about September 1998. Petitioner filed racial
discrimination charges with the California Department of Fair
Employment and Housing against Universal and various individuals.
The charges alleged a cause of action for racial harassment,
racial discrimination, and retaliation "for her race" and her
complaints about discrimination and harassment.
Thereafter, on or about December 14, 1999, petitioner filed
a racial discrimination complaint against Universal in the
Superior Court for the County of Los Angeles.
In an effort to resolve all differences and avoid
litigation, petitioner entered into a "CONFIDENTIAL SETTLEMENT
AGREEMENT AND RELEASE" (settlement agreement) with Universal on
February 8, 2000. The settlement agreement provided that
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