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Brennan v. Commissioner, T.C. Memo. 1997-317; Morabito v.
Commissioner, T.C. Memo. 1997-315; Keel v. Commissioner, T.C.
Memo. 1997-278; Webb v. Commissioner, T.C. Memo. 1996-50.
In deciding the instant motion for summary judgment, we must
examine whether respondent has established that, as a matter of
law, petitioners are not entitled to exclude the ITO payment from
gross income pursuant to section 104(a)(2). Except as otherwise
provided, gross income includes income from all sources. Sec.
61(a); Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429-430
(1955). Although section 61(a) is to be broadly construed,
statutory exclusions from income must be narrowly construed.
Commissioner v. Schleier, 515 U.S. 323, 328 (1995).
Section 104(a)(2) provides that gross income does not
include "the amount of any damages received (whether by suit or
agreement and whether as lump sums or as periodic payments) on
account of personal injuries or sickness". The regulations
provide that "The term 'damages received (whether by suit or
agreement)' means an amount received * * * through prosecution of
a legal suit or action based upon tort or tort type rights, or
through a settlement agreement entered into in lieu of such
prosecution." Sec. 1.104-1(c), Income Tax Regs. Accordingly, to
exclude damages received by settlement agreement from gross
income pursuant to section 104(a)(2), the taxpayer must establish
that: (1) The cause of action giving rise to the recovery is
"based upon tort or tort type rights", and (2) the damages were
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