P & X Markets, Inc. - Page 1

                                   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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