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leave of absence under I.T.O. II".
For the year 1992 petitioner received a Form W-2 from IBM
showing wages of $93,509.68 and Federal income tax withheld of
$17,059.64. Petitioner also received a Form W-2 from Nova
University showing wages of $1,920 and Federal income tax
withheld of $133.02 for that year.
On his Form 1040, petitioner reported wages of $42,002.16
($40,082.16 from IBM and $1,920 from Nova). He did not report the
ITO payment of $53,427.52. He attached a Form 8275 Disclosure
Statement to his 1992 return, asserting that the ITO payment was
excludable under section 104(a)(2) as a payment received in
exchange for the release and settlement of tort-type rights.
Petitioner reported Schedule C net business income of $2,339.67.
He completed Schedule A--Itemized Deductions, incorrectly stating
the total of $983.84, $6,044.99, and $1,027.31 as $8,219.96,
instead of $8,056.14. Petitioner calculated a self-employment tax
of $330.58 and a self-employment tax deduction of $165.29.
Respondent determined that the ITO payment was fully
taxable severance pay. Respondent increased petitioner's income
as follows:
Item Amount
Wages-IBM/Nova 1$53,428
Self-Employment Tax Deduction 165
Itemized Deductions 164
1This figure pertains only to the IBM ITO
payment; the income from Nova was included in
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