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In exchange for signing the release and participating in the
ITO II Program, petitioner received a $74,985 lump-sum payment
(the payment or ITO payment). The payment was based on years of
service and rate of pay.
For the year 1992 petitioner received a Form W-2 from IBM
showing wages, tips, and other compensation as $128,8142. On May
22, 1995, petitioners filed a 1992 joint Federal income tax
return. Petitioners reported the $129,814 as wages, subtracted
the $74,985 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);
Kovacs v. Commissioner, 100 T.C. 124, 128 (1993), affd. without
published opinion 25 F.3d 1048 (6th Cir. 1994).
2 Petitioners received $128,814 from IBM. Petitioners also
received $1,000 from another employer. Thus, petitioners
reported total wages of $129,814 on their 1992 return.
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