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Mr. Davis and petitioner never entered into a written
agreement permitting Mr. Davis to retain the $2,500 at issue.
Petitioner made several requests to Mr. Davis for his $2,500
between the date of the settlement agreement and the date of
trial, but Mr. Davis never sent the money to petitioner.
Petitioner failed to report any of the settlement proceeds
on his 1998 Federal income tax return. On September 6, 2000,
respondent mailed to petitioner a notice of deficiency in which
respondent determined a deficiency of $4,056 in petitioner’s
Federal income tax for 1998. Respondent determined that
petitioner failed to include as income the entire $15,000 of the
settlement proceeds.
Respondent contends that the settlement proceeds are taxable
to petitioner. Respondent’s position is that the full amount of
the $15,000 proceeds to which petitioner is entitled is
includable in petitioner’s gross income for 1998 because
petitioner actually received $12,500 and constructively received
$2,500 during that year.3
3We note that respondent might have raised an argument that
petitioner should include in income his pro rata share (1/2) of
the attorney’s fees paid to Mr. Davis. See Benci-Woodward v.
Commissioner, 219 F.3d 941 (9th Cir. 2000), affg. T.C. Memo.
1998-395; Kenseth v. Commissioner, 114 T.C. 399, affd. 259 F.3d
881 (7th Cir. 2001). However, respondent did not raise this
issue, and we do not consider it. This Court repeatedly has held
that we do not consider issues that have not been pleaded. See
Foil v. Commissioner, 92 T.C. 376, 418 (1989), affd. per curiam
920 F.2d 1196 (5th Cir. 1990); Markwardt v. Commissioner, 64 T.C.
989, 997-998 (1975) (and cases cited therein).
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