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Petitioners Deficiency
Sam and Ella M. Ervin $97,982
Alfred Hudson 97,440
Hawthorne and Vivian H. Echols 95,597
In February 1994, United Insurance Company of America
(United) made payments to petitioners Ella M. Ervin (Ervin),
Alfred Hudson (Hudson), and Vivian H. Echols (Echols) to settle a
lawsuit relating to the purchase of health insurance from United
by Ervin, Hudson, and Echols. Ervin, Hudson, and Echols are
siblings. After concessions,2 the sole issue for decision is
whether petitioners may exclude those payments from gross income
under section 104(a)(2) as damages for personal injuries or
sickness. We hold that they may not.
Section references are to the Internal Revenue Code as
amended and in effect for the year in issue, and Rule references
are to the Tax Court Rules of Practice and Procedure. References
to petitioners are to Ervin, Hudson, and Echols.
2 Respondent conceded that petitioners may deduct their
attorney’s fees and related legal expenses from their gross
settlement proceeds to derive the taxable amounts of the
settlement proceeds.
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Last modified: May 25, 2011