Beverly T. Rutt-Hahn - Page 8

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          benefits.  There is no dispute that petitioner received these               
          payments in 1991.                                                           
               On her 1991 Federal income tax return, petitioner subtracted           
          $41,063, which represents the legal expenses she incurred in                
          prosecuting her action against the Postal Service, from the                 
          $75,000 payment.  She then reported the difference of $33,937 as            
          "Other income" on line 22 of her return.  She reported $42,719 of           
          pension and annuity income, which included the $23,106.64 of                
          increased retirement benefits received for her retroactive                  
          promotion.  Petitioner also reported wages she received from her            
          employment with Specialty Graphics in 1991.                                 
               Respondent determined that petitioner was not entitled to              
          exclude the $41,063 in legal expenses from income.  Respondent              
          further determined that petitioner's legal expenses were                    
          deductible as a miscellaneous itemized deduction.                           
               Petitioner now argues that, under section 104(a)(2), neither           
          the $75,000 payment nor the increased retirement benefits are               
          taxable income.  Petitioner bears the burden to prove she is                
          entitled to exclude the payments she received in 1991 from                  
          income.  Rule 142(a).                                                       
               Except as otherwise provided, gross income includes income             
          from all sources.  Sec. 61(a); Commissioner v. Glenshaw Glass               
          Co., 348 U.S. 426 (1955).  While section 61(a) is to be broadly             
          construed, statutory exclusions from income must be narrowly                






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