- 11 -
Petitioners testified that they became physically ill, lost
sleep, contracted pneumonia, had headaches, suffered emotional
distress, and divorced as a result of Xircom’s withdrawal of the
employment offer to petitioner. However, this does not establish
that Xircom had knowledge of, or intended to pay petitioner
damages on account of, personal injuries or sickness.
Xircom did not pay petitioner for damage to his reputation.
Thus, this case is unlike Fabry v. Commissioner, 223 F.3d 1261,
1270-1271 (11th Cir. 2000), revg. 111 T.C. 305 (1998), where the
U.S. Court of Appeals for the Eleventh Circuit held that, because
the taxpayers’ business reputation was uniquely linked to their
personal reputation, damages paid for injury to the taxpayers’
business reputation were received on account of personal injury
and thus excludable under section 104(a)(2).
We conclude that petitioners may not exclude from income
Xircom’s payments of $59,163 to petitioner in 1994 because they
were a substitute for wages, and they were not paid on account of
personal injuries or sickness. See United States v. Burke, 504
U.S. 229, 234 (1992); Robinson v. Commissioner, supra.
B. Whether Petitioners Are Liable for the Addition to Tax for
Failure To Timely File Their 1994 Income Tax Return
Respondent determined and contends that petitioners are
liable for the addition to tax under section 6651(a) for failure
to timely file their income tax return for 1994. A taxpayer is
liable for an addition to tax of up to 25 percent for failure to
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011