Clarence D. Kightlinger - Page 11

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               (say, at age 25) are assumed to suffer less damage than                
               older workers, who have greater difficulty finding                     
               comparable jobs.  The distribution formula therefore                   
               reflects pension eligibility, as well as age and seniority.            
               Thereafter, in December 1993, the District Court ordered the           
          disposition of the settlement proceeds to individual class                  
          members pursuant to the independent trustee's allocations (except           
          for some minor changes not relevant here).  In the same order,              
          the District Court noted:                                                   
                    Finally, the Court has received some correspondence               
               from class members expressing concern regarding the                    
               taxability of their settlement awards.  One particular class           
               member  * * *  suggests that twenty percent (20%) of the               
               payment amount be withheld for the purpose of satisfying               
               federal income taxes.  At this time the Court makes clear              
               that there will be no withholding of funds from the                    
               settlement award to class members for tax purposes.  This              
               was not a lawsuit about lost wages.  Therefore, each member            
               shall be responsible for taxes based on their particular               
               situation. [Emphasis added.]                                           
               Petitioner received his portion of the recovery from the               
          class action, $12,057.45, in December 1993.  On his 1993 return,            
          petitioner did not include this amount in gross income, claiming            
          exemption under section 104(a)(2).  In April 1994, respondent               
          informally notified class members, such as petitioner, that the             
          settlement proceeds were not excludable from gross income under             
          section 104(a)(2).                                                          
               In March 1995, pursuant to a request by the Plaintiffs, the            
          District Court issued another order.  In that order, the District           
          Court found that the class action: (1) Involved tort-like claims            
          arising from allegations of wrongful conduct and was not about              

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