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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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