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In summary, Winston agreed to change the form of its
original severance offer to accommodate petitioner and facilitate
a settlement after more than 2 years of protracted negotiations.
The substance of the agreement, however, remained the same as
that of the original severance offer. Accordingly, we hold that
the $116,000 was not paid on account of personal injuries and is
not excludable from petitioners’ gross income under section 104.
We hold further that the $116,000 was severance pay or
compensation, and, therefore includable in petitioners’ gross
income.
D. Year of Inclusion
Petitioner contends, in the alternative, that if the
$116,000 is not excludable from income, the payments constitute
his share of partnership income and should be included in income
with respect to the 1995 fiscal year of the partnership, or for
petitioner’s 1995 tax year. See sec. 706(a). Respondent
contends that the proceeds are severance payments and should be
included in income for 1994, the year petitioner received the
payment.
Under section 451(a) amounts received are included in gross
income for the taxable year in which received by the taxpayer,
unless it can be accounted for in a different period under an
acceptable method of accounting. Sec. 451(a); see Keith v.
Commissioner, 115 T.C. 605, 616 (2000).
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