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Respondent determined a deficiency in petitioner's 1991
Federal income tax in the amount of $1,483. The issues we must
decide are: (1) Whether petitioner may exclude from gross income
under section 104 amounts received from her former employer
pursuant to a settlement agreement; and (2) whether petitioner's
legal expenses are properly deductible as a miscellaneous
itemized deduction.
Some of the facts have been stipulated and are so found.
Petitioner resided in Paradise Valley, Arizona, when her petition
was filed.
For clarity and convenience, our findings of fact and
opinion have been combined.
Petitioner Beverly Rutt-Hahn (petitioner) had been employed
by the United States Postal Service (Postal Service) for a number
of years. As of 1983, petitioner was an EAS-15 Supervisor of
Mails and Delivery at the mail sectional center in Phoenix,
Arizona. In July 1984, petitioner applied for disability
retirement from the Postal Service, and her application was
approved. Thereafter, she began to receive civil service
retirement benefits in the form of a disability retirement
annuity.
In October 1987, petitioner filed a lawsuit against the
Postal Service in the United States District Court for the
District of Arizona. In her "Complaint For Damages And Equitable
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