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relating to the leased automobile). That Form W-2 showed "Wages,
tips, other comp." of $23,255.77, "Federal income tax withheld"
of $1,177.71, "Social security tax withheld" of $1441.86, and
"Medicare tax withheld" of $337.21. The Company also issued one
or more Forms 1099 to Mr. D’Amico for 1994. Those Forms 1099
showed additional income totaling $73,518,2 which equaled the sum
of the three payments that the Company had made to and on behalf
of Mr. D’Amico during that year under the settlement agreement
for (1) the mental distress damages ($62,616.45), (2) the cove-
nants of secrecy, the release, and the other covenants and
obligations ($10,000), and (3) the cost of providing medical
benefits to him ($902). (We shall refer collectively to those
Forms 1099 as Forms 1099 relating to the settlement agreement.)
Petitioners reported as income (1) on page 1, line 7 of the
joint Federal income tax return that they filed for 1994 (1994
return) the amount of “Wages, tips, or other comp.” shown in the
Form W-2 relating to the leased automobile3 and (2) on page 1,
line 21 of that return the total of the amounts of income shown
in the Forms 1099 relating to the settlement agreement. However,
2That total amount was rounded to the nearest dollar.
3Petitioners rounded the amount shown in the Form W-2
relating to the leased automobile as “Wages, tips, other comp.”
(i.e., $23,255.77) to the lowest and nearest dollar. For
convenience, we shall do the same when referring to the amount of
income shown in that form.
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