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(3) the prize or award is transferred by the
payor to a governmental unit or organization
described in paragraph (1) or (2) of section
170(c) pursuant to a designation made by the
recipient.
All three of the above conditions must be met in order for a
taxpayer to exclude from income an amount received as an award
that would otherwise be includable in income pursuant to section
74(a).3 Without discussing the conditions set forth in
paragraphs (1) and (2) of section 74(b), it is clear that
petitioner failed to satisfy the condition set forth in paragraph
(3). The university paid the $3,000 directly to petitioner, a
fact that petitioner does not dispute.
Even though petitioner admits that she failed to satisfy the
condition set forth in section 74(b)(3), she contends that
because the university failed to withhold any taxes from the
award payment, the amount received as an award does not
constitute income to her and therefore need not be included in
the income she reported on her 1991 return. The university's
failure to withhold Federal income taxes from the award payment,
however, has no effect on the operation of sections 61(a) and
74(a) that, as discussed above, require petitioner to include the
proceeds of the award in her income. See Church v. Commissioner,
810 F.2d 19 (2d Cir. 1987); Fawcett v. Commissioner, T.C. Memo.
1975-271.
3The exception provided in sec. 74(c) has no application in
this case.
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