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whom offers of that type had been made." The $139,688
represented 37 percent of the full Consent Decree value of Mrs.
Berst's claim. Also, State Farm's offer provided that
petitioner would automatically share in any "incentive cash".
This was an additional amount computed pursuant to a formula
based upon the number of percentage points by which the
acceptance of State Farm's offers exceeded 90 percent. The
maximum amount of such incentive payment under the formula was
$18,000. The offer was required to be accepted by March 20,
1992.
Petitioner accepted the offer, and State Farm issued a
$155,888 check payable to petitioner and class action counsel.
That check represented the $139,688 amount of the settlement of
petitioner's claim, and the remaining amount of $16,200 accounted
for the incentive payment.
On their 1992 return, petitioners did not include any of the
$139,688 settlement amount or any of the $16,200 incentive
payment in their gross income. Petitioners have since conceded
that the settlement amount of $139,688 is taxable, a concession
plainly required by United States v. Burke, 504 U.S. 229 (1992).
The only matter remaining for consideration is whether
petitioners may exclude the $16,200 incentive payment from
income.
Unless otherwise provided, section 61(a) includes in gross
income "all income from whatever source derived". Section 102(a)
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