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3. * * * [Petitioner] hereby agrees and promises * *
* (3) that by entering into this Settlement Agreement and
General Release, she is waiving any and all rights she may
have under the terms of the Consent Decree Regarding
Monetary Relief, Instatement Relief and Notice in this
action ("Consent Decree"), respecting instatement or rights
to any other future class relief.
* * * * * * *
7. It is understood and agreed that this compromise
settlement includes the compromise settlement of any and all
legal, evidentiary, discovery, and production issues
regarding Claim No. 162. * * * [Petitioner] further agrees
and understands that * * * [petitioner] will not bring any
motions, either individually or as part of the class,
relative to such Claim No. 162 issues.
On November 27, 1991, pursuant to the terms of the settlement,
State Farm issued petitioner and her attorneys a check in the
amount of $75,000 (State Farm payment).
On their 1991 joint Federal income tax return, petitioners
reported the State Farm payment as gross receipts in the amount
of $75,000 on their Schedule C. Petitioners, however, also
reported $75,000 as a Schedule C expense, claiming that the
amount was derived from a personal injury claim and, therefore,
was excludable from gross income pursuant to section 104(a)(2).
Respondent determined that the entire State Farm payment should
have been included in petitioners' gross income.
OPINION
Except as otherwise provided, gross income includes income
from all sources. Sec. 61; Commissioner v. Glenshaw Glass Co.,
348 U.S. 426 (1955). Although section 61(a) is to be broadly
construed, statutory exclusions from income must be narrowly
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