Brian David Nelson and Shauna Lee Nelson - Page 11




                                       - 10 -                                         
         PayLess’ refusal to compensate them for overtime work.                       
              We are unpersuaded by the language in the settlement                    
         agreement indicating that the lawsuit giving rise to the                     
         settlement was “not fully plead [sic]”.  Petitioners presented no            
         evidence that petitioner suffered personal injury or sickness as             
         a result of his employment with PayLess.  Petitioner Shauna Lee              
         Nelson testified: “I think PayLess realized that they could have             
         been held liable for * * * many things, including discrimination             
         and, you know, alienation of affections”.  Petitioners also point            
         to the broad language in the settlement agreement releasing                  
         PayLess from all claims that could have been pled in the lawsuit.            
         There must be a direct link, however, between the personal injury            
         or sickness and the recovery of damages for the section 104(a)(2)            
         exclusion to apply.  See Commissioner v. Schleier, 515 U.S. 323,             
         330 (1995).  The language contained in the settlement agreement              
         is insufficient to establish a link between the settlement                   
         agreement and any personal injuries.                                         
              We thus find that petitioner’s settlement proceeds of back              
         wages and liquidated damages were not received on account of                 
         personal injury and therefore do not qualify for exclusion under             
         section 104(a)(2).                                                           
              Petitioners must also include in their gross income the                 
         portion of petitioner’s settlement proceeds retained by the                  
         attorneys representing the plaintiffs in the underlying action.              






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  Next

Last modified: May 25, 2011