E. Pauline Barnes - Page 2

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               Respondent determined a deficiency in petitioner's 1992                
          Federal income tax in the amount of $4,219.                                 
                    After concessions,2 the sole issue for decision is                
          whether section 104(a)(2) authorizes petitioner to exclude from             
          gross income the amount received in settlement of a claim for               
          wrongful termination of employment.                                         
               Some of the facts have been stipulated and are so found.               
          The stipulations of fact and attached exhibits are incorporated             
          herein by this reference.  Petitioner resided in Bethany,                   
          Oklahoma, on the date the petition was filed in this case.                  
               Petitioner worked as a bookkeeper for National Livestock               
          Commission Association (NLCA) from May 22, 1982 until March 30,             
          1990.  On March 29, 1990, petitioner was served with a subpoena             
          to give a deposition in an action involving NLCA.  The next day             
          petitioner's employment was terminated.  Petitioner received a              
          final paycheck in the amount of $2,203.71 for her previous 2                
          weeks' work plus 1-month's severance pay.  NLCA withheld taxes              
          from this amount.                                                           
               As a result of the termination of her employment, petitioner           
          suffered the intangible harms of embarrassment, humiliation, and            
          other mental distress.  Petitioner contends that her mental                 

          2         The parties agree that the issue of whether part of               
          petitioner's Social Security benefits are taxable is a statutory            
          computation controlled by our decision as to the exclusion of the           
          settlement proceeds.                                                        

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