Neil D. and Vy Lubart - Page 5

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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.                                                
               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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