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the wages reported on petitioner's Form 1040.
Respondent reduced petitioner's self-employment tax to
zero, and thus eliminated the self-employment tax deduction. The
adjustment for itemized deductions was a correction of
petitioner's addition error.
Discussion
Gross income includes all income from whatever
sourcederived, unless specifically exempted. Sec. 61(a);
Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955).
Exclusions from income must be narrowly construed. Commissioner
v. Schleier, 515 U.S. , ,115 S. Ct. 2159, 2163 (June 14,
1995).
Section 104(a)(2) provides an exclusion from gross
incomefor "the amount of any damages received (whether by suit or
agreement and whether as lump sums or as periodic payments)
onaccount of personal injuries or sickness". The term "damages
received (whether by suit or agreement)" means "an amount
received (other than workmen's compensation) through prosecution
of a legal suit or action based upon tort or tort type rights, or
through a settlement agreement entered into in lieu of such
prosecution." Sec. 1.104-1(c), Income Tax Regs. Whether a
settlement payment or recovery may be excluded under section
104(a)(2) depends, on the nature of the claim settled or
litigated. Glynn v. Commissioner, 76 T.C. 116, 119 (1981), affd.
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