Ferdinand A. & Marla Morabito, et al. - Page 3

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          "General Release and Covenant Not to Sue" (the Release).  In                
          exchange, they received a lump sum from IBM, consisting of 2                
          weeks' salary for every year of service.  On their 1992 returns,            
          they each excluded the lump-sum payment from gross income.  They            
          each attached Form 8275, Disclosure Statement, to their 1992                
          returns, asserting that the lump-sum amount was excluded because            
          it was "a payment reeived [sic] in exchange for the release                 
          and/or settlement of tort-type rights, as part of the former                
          employer's ITO II Program."3                                                
               IBM instituted the ITO II Program as a method of reducing              
          its workforce.  Employees who participated in the program                   
          resigned or retired from IBM, receiving lump-sum cash payments              
          and other benefits in exchange for signing the Release.  If an              
          ITO II participant was subsequently rehired by IBM or any of its            
          subsidiaries, he was required to repay a prorated portion of the            
          ITO II payment.                                                             
               The Release provides in pertinent part:                                
               In exchange for the sums and benefits which you will                   
               receive pursuant to the terms of the Modified and                      
               Extended Individual Transition Option Program (ITO II                  
               Program), [individual petitioner] agrees to release                    
               International Business Machines Corporation                            
               (hereinafter "IBM") from all claims, demands, actions                  
               or liabilities you may have against IBM which are                      
               related to your employment with IBM or the termination                 
               of that employment.  * * *  You also agree that this                   
               release covers, but is not limited to, claims arising                  

          3 In docket No. 15204-95, involving petitioners Douglas and                 
          Joan Gamble, "reeived" was correctly shown as "received".                   

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