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In accordance with the payment plan set forth in the
settlement agreement, petitioner received $22,000 in 1994. This
amount was received from KENCOR, and KENCOR issued a Form
1099-MISC, Miscellaneous Income, to petitioner reporting the
amount as miscellaneous income. Petitioner did not perform
services for KENCOR during that year, nor did she sell it any
property during that year. Petitioner, allegedly relying on
advice from her attorney and accountant, did not report this
amount on her 1994 Federal income tax return.
Discussion
We must decide whether the $22,000 amount is includable in
petitioner's 1994 gross income. Respondent argues it is.
Petitioner argues it is not. Respondent contends that petitioner
received the disputed amount as compensation for her homemaking
services.4 Petitioner contends that she received the disputed
amount as a gift.
We agree with petitioner that the $22,000 amount is not
includable in her 1994 gross income, but we do so for a reason
slightly different than she espouses. The taxability of proceeds
recovered in settlement of a lawsuit rests upon the nature of the
claim for which the proceeds were received and the actual basis
of recovery. Sager Glove Corp. v. Commissioner, 36 T.C. 1173,
1180 (1961), affd. 311 F.2d 210 (7th Cir. 1962). Ascertaining
the nature of the claim is a factual determination that is
4 In this regard, respondent states, petitioner's homemaking
services do not include sex.
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