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$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