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did not repay the loan. In 1995, the NYRS issued Mr. Broedel a
Form 1099-R, Distributions From Pensions, Annuities, Retirement
or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.,
indicating taxable pension income of $13,393.54. The amount
represented the outstanding loan balance as of Mr. Broedel’s
retirement date.
Petitioners did not report the $13,393.54 on their 1994 Form
1040, U.S. Individual Income Tax Return. Petitioners did not
include the $58,372.50 in payments received under paragraph 2 of
the settlement agreement in gross income on their 1994 return.
However, receipt of the two payments totaling $58,372.50 was
fully disclosed on an attached Form 8275, Disclosure Statement,
signed by Mr. Broedel. In the Form 8275, Mr. Broedel claimed
that the payments were intended to be “a tax-free award” and that
the Form 1099-MISC from the State of New York was erroneously
sent to him.
Before trial, the parties stipulated an affidavit made by
Mr. Babiskin. In the affidavit, Mr. Babiskin stated that “The
settlement agreement constituted the complete agreement between
the parties” and “The subject of Mr. Broedel’s health and/or
physical condition was not discussed in * * * [Mr. Babiskin’s]
presence.”
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