William Joseph and Robin B. Westmiller - Page 3

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               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.           
          1985), affd. in part, revd. in part and remanded 912 F.2d 1182              
          (9th Cir. 1990).  The District Court found that women who                   
          attempted to become State Farm trainee agents were "lied to,                
          misinformed, and discouraged in their efforts to obtain the entry           
          level sales position."                                                      
               On April 17, 1992, State Farm issued a check payable to                
          Ms. Westmiller and her attorneys in the amount of $283,395, and             
          State Farm withheld another $148 for State and Federal income               
          taxes, in settlement of Ms. Westmiller's claims in the Lawsuit.             
          Ms. Westmiller's attorneys kept $57,702 of the amount stated in             
          the check, and Ms. Westmiller received the rest.  Petitioners did           
          not include any of the $283,395 amount in their 1992 gross                  
          income, stating on their 1992 tax return that section 104(a)(2)             
          allows them to exclude from gross income any amount received from           
          State Farm in connection with the Lawsuit.                                  
               On June 3, 1996, respondent issued petitioners a notice of             
          deficiency for 1992.  The notice states that petitioners received           
          $283,1171 in settlement of the Lawsuit, and that this amount is             
          taxable to them.  The notice also states that petitioners may               

               1 The record does not disclose why respondent attempts to              
          tax only $283,117 of the amount that Ms. Westmiller received in             
          settlement of the Lawsuit.                                                  

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