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Respondent issued one notice of deficiency to petitioner and
Mrs. Hamblin and determined that the $40,611 gross amount
received by petitioner from PayLess constituted gross income, and
$13,039 of the attorney's fees and costs related to the PayLess
award was allowable as an itemized deduction.3 Because the
standard deduction claimed on the return was less than the
allowed itemized deduction, respondent substituted the $13,039 in
attorney's fees and costs for the standard deduction claimed on
the return.4 The $2,961 in earned income credit on the return
was also disallowed in full. See supra note 2.
Petitioner filed a timely petition in this Court. Mrs.
Hamblin did not petition this Court.
Petitioner contends that the amount he received in the
settlement represented damages for the physical and mental strain
he suffered in the undue hours and days he was required to work
for PayLess, which he could no longer endure and resulted in his
leaving the employment. More specifically, when questioned at
trial as to what was the personal injury he sustained, petitioner
3 The allowed amount presumably consists of the $14,023
withheld from petitioner's award less 2 percent of adjusted gross
income that is not allowable under sec. 67(a).
4 Petitioner has not challenged respondent's inclusion of
the $14,023 in attorney's fees in gross income and allowance of
that amount as an itemized deduction, reduced by the sec. 67(a)
limitation. See Miller v. Commissioner, T.C. Memo. 2001-55;
Benci-Woodward v. Commissioner, 219 F.3d 941 (9th Cir. 2000),
affg. T.C. Memo. 1998-395.
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