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participant in the ITO II Program was calculated using the same
mathematical formula based on years of service.
For the year 1992 petitioner received a Form W-2 from IBM
showing wages, tips, and other compensation of $218,329.
Petitioners attached a disclosure statement to their 1992 return,
asserting that the $94,174 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).
Under section 104(a)(2), gross income does not include "the
amount of any damages received (whether by suit or agreement and
whether as lump sums or as periodic payments) on account of
personal injuries or sickness". Section 1.104-1(c), Income Tax
Regs., provides:
(c) Damages received on account of personal
injuries or sickness. * * * The term "damages
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