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effect for the year in issue, and 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 accompanying exhibits are
incorporated herein by this reference. Petitioner resided in
Orange, California, at the time the petition was filed.
Respondent determined a deficiency of $4,056 in petitioner’s
1998 Federal income tax. After a concession,1 the issues for
decision are: (1) Whether the amounts petitioner actually or
constructively received in settlement of a suit for unpaid
overtime wages constitute gross income to petitioner, and (2) if
so, whether petitioner constructively received a portion of the
settlement proceeds that his attorney did not remit to him.
Background
Prior to the year in issue, petitioner was employed as a
laboratory manager (lab manager) by Kits Camera, Inc. (Kits).2
In June 1997, petitioner, along with five other individuals,
filed a class action lawsuit in the Superior Court for the State
of California for the County of Orange against Kits for damages
for failure to pay overtime compensation and for failure to pay
1Petitioner concedes that he is liable for the 10-percent
additional tax under sec. 72(t) of $41 for an early distribution
of $414 from a retirement account.
2At some point during or prior to 1998, Kits Camera, Inc.,
changed its name to Kits Sunset, Inc.
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