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Petitioner was 45 years old when he began to receive payments
from UNUM.
In a letter dated January 8, 1990, UNUM informed petitioner
that his disability payments would end May 1, 1991, because in
UNUM’s view, petitioner’s disability was due to mental illness,
and the disability plan covered mental illness for only 24
months. In a letter dated June 30, 1991, UNUM informed
petitioner that its investigation of his medical condition was
ongoing, and that UNUM had decided to extend payments through
July 1, 1991. For the period between May 1991 and May 1992, UNUM
stopped making monthly payments on several occasions and resumed
those payments only after petitioner threatened legal action. In
May 1992, after protracted oral negotiations, UNUM paid
petitioner a lump-sum settlement of $135,000 with respect to his
disability claim. UNUM issued a Form W-2, Wage and Tax
Statement, to petitioner for the taxable year 1992 in the amount
of $150,646, which included the lump-sum amount and other
payments made by UNUM in that year. Petitioners did not include
any of the Form W-2 amount in income in 1992 and did not attach
the Form W-2 to their return.
On July 17, 1992, petitioner filed a request for hearing
with the Social Security Administration for disability insurance
benefits, and his claim was upheld in a decision by the presiding
administrative law judge on March 24, 1993. The administrative
law judge found that petitioner was under a “disability” within
the meaning of sections 216(i) and 223 of the Social Security
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