John R. and Sara E. Wise - Page 8

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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.                               
               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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