Violet A. Reynolds - Page 8

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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.                               
               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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