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and costs of $41,395, and the remaining $165,344 was paid to
petitioner.
On their 1992 joint Federal income tax return, petitioners
did not report the State Farm payment. Respondent determined
that the entire State Farm payment should have been included in
petitioners' gross income. Additionally, respondent asserted in
the answer that petitioners are entitled to claim legal fees in
the amount of $41,395 as a miscellaneous itemized deduction.
OPINION
Petitioners did not file a brief in the instant case.
Accordingly, we address the issues argued by petitioners in their
trial memorandum.
Except as otherwise provided, gross income includes income
from all sources. Sec. 61; Commissioner v. Glenshaw Glass Co.,
348 U.S. 426 (1955). Although section 61(a) is to be broadly
construed, statutory exclusions from income must be narrowly
construed. Commissioner v. Schleier, 515 U.S. , , 115 S.
Ct. 2159, 2163 (1995).
Pursuant to section 104(a)(2), 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
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