Lars E. Fredrickson, Jr., and Donna J. Fredrickson - Page 2

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               1.  Whether petitioners, pursuant to section 104(a)(2), are            
          entitled to exclude amounts received in settlement of a class               
          action suit.  We hold they are not.                                         
               2.  Whether petitioners, pursuant to section 162, are                  
          entitled to an above-the-line deduction for legal fees.  We hold            
          they are not.                                                               
               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code as in effect for the year in issue, and           
          all Rule references are to the Tax Court Rules of Practice and              
               The facts have been fully stipulated under Rule 122 and are            
          so found.  At the time the petition was filed, petitioners                  
          resided in Eureka, California.                                              
               On June 1, 1979, a class action suit against State Farm                
          General Insurance Co., State Farm Mutual Automobile Insurance               
          Co., State Farm Life Insurance Co., and State Farm Fire and                 
          Casualty Co. (State Farm) was filed in the U.S. District Court              
          for the Northern District of California, Kraszewski, et al. v.              
          State Farm Gen. Ins. Co..  The plaintiffs alleged that State                
          Farm, in violation of title VII of the Civil Rights Act of 1964             
          (Title VII), had discriminated against women in the hiring of its           
          insurance agents.  On November 6, 1981, the District Court                  
          bifurcated the litigation into a liability and a remedy phase.              

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