John Lee Berst & Carolyn Ann Pace, a.k.a. Carolyn Ann Berst - Page 6

                                                  -6-                                                   
            $139,688.  Offering up to $18,000 to save potentially hundreds of                           
            thousands of dollars indicates self-interest, not disinterest.                              
                  As for petitioners' contention that no conditions were                                
            placed upon the incentive payment, the full quotation from the                              
            Communication of State Farm's Settlement Offer reads, "In                                   
            addition, if you accept this offer you will automatically share                             
            in any Incentive Cash payable as described in Paragraph (2)                                 
            below."  (Emphasis added.)  Petitioner was not eligible to                                  
            receive the incentive cash unless she signed the Release, which                             
            protected State Farm against future claims.  Her signing of the                             
            Release was the consideration for the incentive payment.  It was                            
            thus a bargained-for exchange.                                                              
                  Petitioners also contend that since there is no body of case                          
            law that includes incentive payments in income, petitioner's                                
            incentive payment should be excluded.  To the contrary, section                             
            61(a) is construed broadly so that, except for those items                                  
            specifically exempted, all income is subject to tax.                                        
            Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429-430 (1955).                           
            Since there is no specific exemption under which this payment                               
            could be excluded, it must be included in gross income.                                     
                  Petitioners advance other arguments which we find to be                               
            without merit.  Due to concessions by the parties,                                          
                                                       Decision will be entered                         
                                                under Rule 155.                                         






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Last modified: May 25, 2011