5
By the terms of the agreement, petitioner was paid $11,000 in
consideration for the settlement of the EEO complaints and MSPB
appeals.
Sandy Soloman, regional counsel for the Army, drafted the
settlement agreement. Petitioners were paid $11,000 by the Army
on December 1, 1992. Petitioners did not include any of the
settlement proceeds in gross income reported on their Federal
income tax return filed for 1992. In the notice of deficiency,
respondent increased petitioners' taxable income by $11,000 to
reflect the amount of settlement proceeds received by petitioners
from the Army.
Petitioners contend that the settlement proceeds were paid
to petitioner to settle his claims for damages for personal
injuries and that the $11,000 is excludable from income under
section 104(a)(2).
Respondent's determination is presumed correct, and
petitioners bear the burden of proving it erroneous. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Section 61 broadly defines gross income to include all
income from whatever source derived, except as otherwise
provided. Statutory exclusions from income are 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
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