Hilario M. and Cathy C. Aguirre - Page 3

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               Respondent determined a deficiency of $1,073 in petitioners’           
          1998 Federal income tax.  The issue for decision is whether                 
          petitioners must include in income certain amounts paid to                  
          Hilario M. Aguirre in 1998 as a result of a back injury sustained           
          in the previous year.                                                       
               Some of the facts have been stipulated and are so found.               
          Petitioners are husband and wife.  They filed a timely 1998 joint           
          Federal income tax return.  At the time the petition was filed,             
          they resided in Richmond, Texas.  References to petitioner are to           
          Hilario M. Aguirre.                                                         
               At all relevant times, petitioner was employed by Anheuser             
          Busch, Inc. (Anheuser).  In 1997, petitioner injured his back and           
          filed a claim for worker’s compensation benefits.  At first his             
          claim was disputed, but ultimately, in 1998, petitioner was                 
          awarded worker’s compensation benefits totaling $15,852.29 of               
          which, for reasons explained below, only approximately $9,000 was           
          paid directly to him.                                                       
               During the period in which petitioner’s worker’s                       
          compensation claim was under consideration, he entered into an              
          agreement with Anheuser (the agreement) whereby he was entitled             
          to receive certain benefits upon the condition that any amount he           
          received pursuant to the agreement would be repaid from any                 
          worker’s compensation award that he might subsequently receive.             

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