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in W-2--allowed” with respect to the payments from DHS. The
record does not disclose the basis for respondent’s allowing the
DHS settlement amount to be excluded in 1990 or the information
that respondent relied upon in making his concession. On January
11, 1994, the Tax Court entered a stipulated decision of no
deficiency in income tax for petitioners’ 1990 taxable year.
With respect to the audit of the 1992 return, a Form 4700,
Examination Workpaper, dated March 31, 1994, and completed by
respondent’s agent, states:
T/P received W-2 from Deloitte & Touche in amt. of
$41,999.38--list’d as income line 7 of rtrn. deleted as
taxable income line 22 of rtrn--T/p received structured
settlement providing for annual compensation payments
from ex-employer in settlement of all claims for
Wormen’s [sic] Compensation--T/ps have been deleting as
income since 1985. Per audit of 9012--determined not
taxable income.
The issue regarding the taxability of the amount received from
DHS appears to have been resolved before the issuance of the
notice of deficiency for 1992.
A document contained in respondent’s audit file regarding
petitioners’ 1993 taxable year states that “Per District Counsel
settlement in prior year, TPH is authorized to declare as non-
taxable income the amounts reported on W-2 from Deloitte &
Touche. Issue is no-changed.” In connection with the audit of
the 1993 return, respondent’s tax auditor sent petitioners a
letter dated February 12, 1996, advising them that the payments
from DHS were excludable from gross income and that they should
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