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resignation from Holnam and a $24,500 lump-sum payment on
March 14, 1994. In addition, Holnam agreed to provide petitioner
with medical and dental coverage through March 30, 1994. In
exchange, petitioner agreed, among other things, to release
Holnam from the following pertinent claims: (1) Any claim that
petitioner was wrongfully forced to resign; (2) all claims for
breach of employment agreement; (3) any claim under "Wrongful
Discharge For Employment Act, Sec. 39-2-901 et seq."; (4) any
claim for discrimination under title VII of the Civil Rights Act
of 1964 or the Montana Human Rights Act; (5) all claims for
improper separation that could have been brought under any local,
State, or Federal administrative agency jurisdiction; (6) all
claims for mental and/or physical injury, damages to or loss of
personal reputation, libel, slander, or defamation of character,
intentional infliction of emotional stress, or violation of civil
or constitutional rights; (7) any claim concerning interference
with any contractual relationship; and (8) any claim for salary,
fringe benefits, costs, expenses or attorney's fees.
Petitioner received $37,840 under the settlement agreement
during the taxable year 1994, which Holnam reflected as wages or
income to petitioner in the 1994, Form W-2 that Holnam supplied
to petitioner. Holnam withheld income and employment tax from
the amount paid under the settlement agreement. Petitioner, on
line 21 of page 1 of his Form 1040 (U.S. Individual Income Tax
Return), deducted $37,714, and in a schedule attached to the
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