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OPINION
Although respondent determined in the notice to increase
petitioners’ income by $34,157, respondent concedes in respon-
dent’s answering brief that $902 of that amount, which was the
cost to the Company of providing medical benefits to Mr. D’Amico
under the settlement agreement, is to be excluded from petition-
ers’ gross income under section 106(a). Petitioners bear the
burden of showing that respondent erred in determining that the
remaining amount, i.e., $33,255, is to be included in their
taxable income for 1994. See Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933).
The total amount of $33,255 that remains in dispute consists
of the following two components: (1) $10,000 that the Company
paid Mr. D’Amico during 1994 in consideration for the covenants
of secrecy, the release, and the other covenants and obligations
to which Mr. D’Amico agreed ($10,000 payment) and (2) $23,255
that the Company paid to purchase the leased automobile, the
ownership of which it transferred to Mr. D’Amico pursuant to the
settlement agreement ($23,255 payment).4 Petitioners rely on
4Petitioners advance as an alternative argument for the
first time on brief that in the event that the Court were to hold
against them under sec. 104(a), the fair market value of the
leased automobile, and not the amount that the Company paid to
purchase it, should be used in determining the increase in
petitioners’ income for 1994 that is attributable to that
automobile. In this regard, petitioners contend that the fair
(continued...)
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Last modified: May 25, 2011