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distress manifested itself in the appearance of precancerous
tumors which are being monitored by her doctor.
On November 26, 1990, petitioner filed a wrongful
termination action against NLCA alleging the following:
5. As a result of [the] fact that [petitioner] was
about to testify against [NLCA] and as a result of
[petitioner's] refusal to continue to engage in
illegal, unethical and/or improper business practices
[NLCA] terminated [petitioner] on March 30, 1990 in
contravention of the public policy of the State of
Oklahoma and the United States.
6. [Petitioner] further alleges that [NLCA]'s actions
were intentional, wilful and malicious. [Petitioner]
is entitled to punitive damages.
7. [Petitioner] alleges that as a direct result of
her termination she has sustained damages for past and
future lost wages as well as mental distress.
The petition in the wrongful termination action did not
allocate any specific dollar amounts to the alleged damages but
rather generally prayed for a judgment "in excess of $10,000.00,
together with interest, costs and such other relief as the Court
deems just and proper."
Petitioner's claim was settled on February 3, 1992, pursuant
to a General Release and Settlement Agreement signed by
petitioner and her attorney in that dispute. Pursuant to this
agreement, NLCA paid petitioner $27,000 by check in exchange for
her release of all claims. NLCA did not withhold any taxes from
this amount. Petitioner received a Form 1099-MISC from NLCA
showing a prize or award in the amount of $27,000. On her 1992
Federal income tax return, petitioner excluded this amount from
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