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whether proceeds from the settlement of a lawsuit arising out of
Mr. Norton’s fishing activities are excludable from income pursuant
to section 104(a)(2); (3) whether statutory prejudgment interest
the Nortons received in connection with a personal injury award is
excludable from income pursuant to section 104(a)(2); (4) whether
the Nortons are entitled to a $15,000 deduction for an ostensible
payment of environmental cleanup expenses made in connection with
their acquisition of rental property; and (5) whether the Nortons
are liable for the accuracy-related penalty.
All section references are to the Internal Revenue Code as in
effect for the year under consideration. All Rule references are
to the Tax Court Rules of Practice and Procedure.
Some of the facts have been stipulated and are so found. The
stipulation of facts and the attached exhibits are incorporated
herein by this reference.
Background
The Nortons, husband and wife, resided in Palmer, Alaska, at
the time they filed their petition. Quantum Co. Trust’s mailing
address at the time the trustee thereof filed a petition was
Palmer, Alaska.
During 1993, Mr. Norton was engaged in two unrelated business
activities–-construction of residential and commercial buildings
(through Northridge) and commercial fishing. Northridge operated
as a general contractor with respect to the construction of
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