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and therefore had a claim against IBM for age discrimination and
emotional distress.
In exchange for signing the release and participating in the
ITO II Program, petitioner received a $91,690 lump-sum payment
(the payment or ITO payment). The payment was based on years of
service and rate of pay.
For the year 1993 petitioner received a Form W-2 from IBM
showing wages, tips, and other compensation as $228,290.3 On
April 15, 1994, petitioners filed a 1993 joint Federal income tax
return. Petitioners reported the $228,290 as wages, subtracted
the $91,690 ITO payment therefrom, and attached a disclosure
statement to their return, asserting that the ITO payment is
excludable from gross income pursuant to section 104(a)(2) as a
payment received in exchange for the release and settlement of
tortlike rights. Respondent determined that the ITO payment was
fully taxable severance pay.
Discussion
Except as otherwise provided, gross income includes income
from all sources. Sec. 61(a); Commissioner v. Glenshaw Glass
Co., 348 U.S. 426 (1955). While section 61(a) is to be broadly
construed, statutory exclusions from income are narrowly
construed. Commissioner v. Schleier, 515 U.S. 323, 328 (1995);
3 On July 2, 1996, petitioners filed an amended return on
which they excluded the $91,690 from gross income.
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