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concession by respondent,2 the issue for decision is whether a
$5,000 payment that Robert Henderson (Mr. Henderson) received in
1999 in settlement of a claim against Morgan, Stanley, Dean
Witter & Co. (Morgan Stanley) is excludable from petitioner’s
gross income under section 104(a)(2). We hold that it is not.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by reference. At the time he filed the
petition, Mr. Henderson resided in Ojai, California.
A. Petitioner’s Motel Dispute
For a period of time during 1997, Mr. Henderson stayed at a
motel in Monterey, California. To pay for his accommodations,
Mr. Henderson used a credit card called Prime Option issued by
Morgan Stanley. Following a dispute with the motel owner, Mr.
Henderson paid the credit card account balance and canceled the
credit card.
Approximately 10 weeks later in February 1998, the motel
charged Mr. Henderson $780. Morgan Stanley accepted and paid the
$780 charge to Mr. Henderson’s account. Morgan Stanley then
attempted collection from Mr. Henderson. When Mr. Henderson
2 Respondent concedes that petitioner is not liable for
self-employment tax of $706 under sec. 1402(a), reducing
petitioner’s deficiency to $336.
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