Joseph S. Rozpad and Kathleen M. Rozpad - Page 2

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          1994.  On April 1, 1997, we granted respondent's motion to                  
          consolidate the Rozpads' and the DiBiasios' cases.                          
               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code in effect for the years in issue, and             
          all Rule references are to the Tax Court Rules of Practice and              
          Procedure.  The issues for decision are:                                    
               1.  Whether portions of the proceeds received by petitioners           
          in their respective settlements of tort actions are excludable              
          from gross income under section 104(a)(2).  We hold that they are           
          not excludable.                                                             
               2.  Whether petitioners may, pursuant to section 212, deduct           
          attorney's fees and costs relating to their respective                      
          settlements.  We hold that they are entitled to deduct such fees            
          and costs.                                                                  
               3.  Whether the 3-year statute of limitation bars respondent           
          from assessing and collecting the deficiency relating to the                
          DiBiasios' 1989 tax year.  We hold that it does not.                        
                                  FINDINGS OF FACT                                    
               The parties submitted these cases fully stipulated pursuant            
          to Rule 122.  At the time the Rozpads filed their petition, they            
          resided in Riverside, Rhode Island.  At the time the DiBiasios              
          filed their petition, they resided in Cranston, Rhode Island.               
          The Rozpads                                                                 







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