106 T.C. No. 26
UNITED STATES TAX COURT
P & X MARKETS, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15836-95. Filed June 13, 1996.
P, a corporation, filed a lawsuit against various
defendants alleging breach of contract, malicious
prosecution, intentional interference with business
relationship, fraud, and violation of fiduciary and
statutory duties. P received $850,000 to settle the
suit, and it paid $198,367 in legal fees in connection
therewith. On its Federal income tax return, P
included $83,608 of the settlement proceeds in its
gross income. P relied on sec. 104(a)(2), I.R.C., to
exclude the remaining proceeds (net of the legal fees)
from its gross income. R determined that P’s gross
income includes the total proceeds, less the legal
fees. Held: None of the proceeds are excludable from
P’s gross income under sec. 104(a)(2), I.R.C., because
the settlement proceeds were not received on account of
a personal injury.
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