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After concessions,1 the issue to be decided is whether
petitioners are entitled to exclude, pursuant to section
104(a)(2), amounts received in settlement of a class action suit.
FINDINGS OF FACT
Some of the facts have been stipulated for trial pursuant to
Rule 91. The parties' stipulations of fact are incorporated
herein by reference and are found as facts in the instant case.
At the time they filed their petition in the instant case,
petitioners resided in El Dorado Hills, California.
On June 1, 1979, a class action lawsuit, Kraszewski v. State
Farm Gen. Ins. Co., was filed against State Farm General
Insurance Co., State Farm Mutual Automobile Insurance Co., State
Farm Life Insurance Co., and State Farm Fire and Casualty Co.
(State Farm) in the U.S. District Court for the Northern District
of California.2 The class representatives alleged that State
Farm had engaged in statewide discrimination in California in the
recruiting, hiring, and training of women for sales agent trainee
positions in violation of title VII of the Civil Rights Act of
1 In the notice of deficiency, respondent determined that, for
taxable year 1991, petitioners were liable for self-employment
tax in the amount of $5,381 and were entitled to a self-
employment tax deduction in the amount of $2,690. Subsequently,
the parties conceded that petitioners were not liable for the
self-employment tax and that petitioners were not entitled to the
self-employment tax deduction.
2 On Sept. 9, 1981, the District Court for the Northern
District of California certified a class in Kraszewski to
maintain the action. See Kraszewski v. State Farm Gen. Ins. Co.,
27 Fair Empl. Prac. Cas. (BNA) 27 (N.D. Cal. 1981).
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