James E. Brown - Page 11

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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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