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In 1993, IBM paid petitioner the $207,000, in two payments of
$103,500. IBM included the $207,000 in petitioner's Form W-2, and
applied withholding tax to the entire amount.
1993 Federal Income Tax Return
On their 1993 Federal income tax return, petitioners excluded
the $207,000 payment from their income. Appended to their return
was a document entitled "Exclusion of Settlement of Personal Injury
Claim (Age Discrimination) from Gross Income". In relevant part,
the document stated:
In exchange for a payment of $207,000 I agreed
in paragraph number 6(c) to release all claims
for age discrimination, including those
available under Title VII of the Civil Rights
Act, as amended. I was 55 years old at the
time IBM was hiring new lawyers (either recent
graduates or persons about to graduate from
law school).
* * * * * * *
Therefore I have excluded the $207,000
settlement for age discrimination from gross
income.
Notice of Deficiency
In the notice of deficiency, respondent determined that the
entire $207,000 settlement payment petitioner received from IBM is
includable in petitioners' 1993 gross income.
OPINION
The sole issue for decision is whether the $207,000
petitioner received as a result of the termination of his
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