Francis Lawrence and Kathryn Tenopir Remkiewicz - Page 4




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          against the Lynwood School District.  The cause of action was               
          based solely on the Civil Rights Act of 1964, 42 U.S.C. secs.               
          2000a to 2000b-2.  Petitioner alleged discrimination in placing             
          him on administrative leave and not reviewing his employment                
          agreement, and he sought damages for emotional distress, backpay,           
          punitive damages, attorney’s fees, and the cost of his suit.                
               During 1996, the parties to the above-referenced litigation            
          entered into a settlement agreement under which petitioner                  
          received damages of $140,000 solely for emotional distress.  Also           
          during 1996, petitioner paid legal fees and costs, in the total             
          amount of $55,127.03, for the legal representation concerning the           
          termination of his employment with the Lynwood District and the             
          Civil Rights Act litigation and its settlement.  On their U.S.              
          Individual Income Tax Return (Form 1040) for 1996, petitioners              
          claimed, on Schedule A, Itemized Deductions, the $55,127.03 for             
          legal fees and costs, and respondent disallowed the claim.  Of              
          the $55,127.03 in legal fees, $10,000 is attributable to the                
          attorney’s efforts before the school board and to protect                   
          petitioner’s potential for future compensation as an employee.              
                                       OPINION                                        
               Respondent agrees that petitioner’s $140,000 settlement                
          recovery is exempt from tax under section 104(a)(2).2  The                  

               2 All section references are to the Internal Revenue Code in           
          effect for the year in issue, and all Rule references are to the            
                                                             (continued...)           





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