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Petitioners argue that because CWRU did not issue a Form W-
2, Wage and Tax Statement, or a Form 1099 for the amount of the
settlement proceeds, or withhold taxes on the settlement
proceeds, the university must have intended the payment to be
nontaxable.5 We disagree.
Mr. Makee testified that CWRU did not issue a Form W-2 or
1099 because Mr. Reisman’s counsel refused to discuss allocating
the settlement payment. Under the circumstances, Mr. Makee felt
that it was inappropriate to issue a Form 1099. Notwithstanding
the fact that Mr. Reisman’s attorneys would not discuss
allocating the proceeds, CWRU settled when negotiations were ripe
for settlement because according to Mr. Makee, Mr. Reisman’s case
was particularly difficult, but one that Mr. Makee felt should be
resolved.
Overall, we believe that the settlement agreement was
entered into to settle an employment dispute, not to settle tort
type claims. The record supports our finding that approximately
$300,000 of the lump-sum payment by CWRU was in exchange for Mr.
Reisman’s resignation of his position and the relinquishment of
his tenure rights. Regarding the remaining $50,000, petitioners
5Petitioners also argue that a letter written by one of
their attorneys who negotiated the settlement agreement on their
behalf, expressing his belief that the payment was nontaxable, is
evidence of CWRU’s intent. We disagree. The letter written by
one of petitioners’ attorneys stating that he believed the
proceeds were nontaxable is not directly relevant as to what CWRU
intended.
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