- 3 -
total of $18,466.72). At the time she executed the agreement,
Ms. Ball did not have any pending complaints against Revlon.
Petitioners filed in a timely manner their 1994 Federal
income tax return. On the return, petitioners: (1) Reported
wage income of $8,705.59; (2) attached a Form W-2 which reported
that Ms. Ball received $17,411.18 in "wages, tips, other
compensation" from Revlon; and (3) attached copies of the
separation and release agreement to support their position that
one-half (i.e., $8,705.59) of the $17,411.18 reported on the Form
W-2 was excludable from gross income pursuant to section
104(a)(2). On November 27, 1996, respondent issued petitioners a
notice of deficiency in which respondent determined that
petitioners were not entitled to the claimed exclusion.
OPINION
Section 104(a)(2) excludes from gross income "the amount of
any damages received (whether by suit or agreement and whether as
lump sums or as periodic payments) on account of personal
injuries or sickness". An award of damages may be excluded from
gross income only when it is received both: (1) Through
prosecution or settlement of an action based upon tort or tort
type rights and (2) on account of personal injuries or sickness.
Commissioner v. Schleier, 515 U.S. 323, 333-334 (1995).
Petitioners did not present any evidence to establish that
the agreement settled an action based upon tort type rights. Ms.
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