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only remaining issue is whether section 104(a)(2) allows them to
exclude from their gross income $149,990 of settlement proceeds
received from State Farm Insurance Co. (State Farm). We hold it
does not. Section references are to the Internal Revenue Code in
effect for the year in issue. Rule references are to the Tax
Court Rules of Practice and Procedure.
Background
All the facts have been stipulated and are so found. The
stipulated facts and the exhibits submitted therewith are
incorporated herein by this reference. Petitioners resided in
Ventura, California, when they petitioned the Court. They filed
a 1992 Form 1040, U.S. Individual Income Tax Return, using the
filing status of "Married filing joint return".
Mrs. Reiher was a claimant in the class action lawsuit (the
Lawsuit) entitled Kraszewski, et al. v. State Farm Gen. Ins. Co.
The Lawsuit was filed against State Farm in the U.S. District
Court for the Northern District of California on June 1, 1979, on
behalf of a class of women who alleged that State Farm had
engaged in sex discrimination during the recruitment, hiring, and
training of women for insurance sales agent positions within
California, in violation of Title VII of the Civil Rights Act of
1964, Pub. L. 88-352, 78 Stat. 241.
On April 29, 1985, the District Court ruled that State Farm
was liable for gender discrimination. See Kraszewski v. State
Farm Gen. Ins. Co., 38 Fair Empl. Prac. Cas. (BNA) 197 (N.D. Cal.
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