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taxable. Petitioner asserts that this amount received relating
to the Title VII claim is excludable from his gross income.
In United States v. Burke, 504 U.S. 229, 242 (1992), the
Supreme Court held that backpay awards received in settlement of
Title VII discrimination claims were not excludable from gross
income under section 104(a)(2). The Supreme Court noted that
"Congress declined to recompense Title VII plaintiffs for
anything beyond the wages properly due them--wages that, if paid
in the ordinary course, would have been fully taxable." Id. at
241.
Petitioner argues that respondent cannot apply Burke
retroactively. We disagree.
Section 104(a)(2), as it relates to the Title VII claim, was
in effect when respondent mailed the notice of deficiency to
petitioner, and the Supreme Court's holding in Burke construed
but did not change that existing law. In addition, the Supreme
Court has held:
When this Court applies a rule of federal law to the
parties before it, that rule is the controlling
interpretation of federal law and must be given full
retroactive effect in all cases still open on direct
review and as to all events, regardless of whether such
events predate or postdate our announcement of the rule.
Harper v. Virginia Dept. of Taxation, 509 U.S. 86, 97 (1993);
accord James B. Beam Distilling Co. v. Georgia, 501 U.S. 529
(1991).
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