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L. “Tax Consistency” Letter
A letter dated June 8, 1994, addressed to Peter Hobler and
signed by David Fleisher, the chief financial officer of Maritz
Inc., states that “It is understood” by Maritz Inc. that the
settlement payments to Katherine and Damian “are, and for income
tax purposes shall be treated as, payments in settlement of
claims for personal damages” and therefore “do not require
reporting on Form 1099 or any other applicable information
reporting form.”
M. Settlement Payments, Tax Reporting, and Examination
On July 7, 1994, Katherine and Damian received checks from
Maritz Inc. in amounts of $500,000 and $250,000, respectively.
Maritz Inc. issued no Form 1099 to Katherine or Damian.
Petitioners did not report the settlement payments on their
respective 1994 joint Federal income tax returns.
On June 5, 1998, respondent commenced examination of
petitioners’ 1994 Federal income tax returns. On October 6,
2000, by separate notices of deficiency, respondent determined
that the settlement payments were includable in petitioners’
respective taxable incomes for 1994.
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