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using a 1 week's pay per year of service method.) Petitioners
provided the following explanation on the last page attached to
their return: "Other Disclosure: The taxpayer received 1012233 from
Weyerhaeuser Co. as settlement for mental anxiety and injury to
personal reputation caused upon termination of employment."
Notice of Deficiency
In the notice of deficiency, respondent determined that the
entire $1,125,000 settlement payment petitioner received from WC is
includable in petitioners' 1989 gross income.
OPINION
The sole issue for decision is whether $1,012,233 ($1,125,000
less $112,767) received by petitioner as a result of the termination
of his employment is excludable from petitioners' 1989 gross income
pursuant to section 104(a)(2) as damages received on account of
personal injury or sickness. Petitioners argue that they are
entitled to exclude that amount. Respondent disagrees.
Except as otherwise provided, gross income includes income from
all sources. Sec. 61; Commissioner v. Glenshaw Glass Co., 348 U.S.
426, 429-430 (1955). Although section 61(a) is to be broadly
construed, statutory exclusions from income must be narrowly
construed. Commissioner v. Schleier, 515 U.S. 323, 327-328 (1995).
Pursuant to section 104(a)(2), gross income does not include
"the amount of any damages received (whether by suit or agreement
and whether as lump sums or as periodic payments) on account of
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