Manuel J. Serpa, Jr. and Patricia A. Serpa - Page 2

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          personal injury under section 104(a)(2).  We hold that $42,910              
          (28.61 percent of the $150,000 payment)1 was prejudgment interest           
          and is not excludable under section 104.                                    
               Unless otherwise specified, 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                                       
               The parties submitted this case fully stipulated under Rule            
          122.                                                                        
          A.   Petitioners                                                            
               Petitioners resided in Greenwich, Rhode Island, when the               
          petition was filed.                                                         
               On January 18, 1987, petitioner Patricia A. Serpa (Mrs.                
          Serpa) was riding in a car driven by petitioner Manuel J. Serpa,            
          Jr. (Mr. Serpa), when it was struck by a car driven by Denise A.            
          Danis and owned by Daniel A. Danis (the Danises).  Mrs. Serpa               
          suffered back injuries.                                                     
          B.   The Tort Action, Judgment, and Interest                                
               Mrs. Serpa was represented by Joseph J. McGair (McGair), who           
          filed a personal injury lawsuit on her behalf in the Superior               
          Court of Rhode Island on July 17, 1989, against the Danises.  The           



               1 The parties stipulated that if we find that a part of the            
          settlement is allocable to statutory interest, $42,910 of the               
          settlement is taxable income.                                               




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