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We have held that the $116,000 in lump-sum payments was a
severance payment to petitioner. There is no evidence that a
Form K-1 was issued by Winston with respect to the $116,000.
Indeed, petitioner and Winston attempted to treat the $116,000 as
settlement of petitioner’s personal injury claims. Petitioner was
no longer an employee or partner of Winston. The purpose of the
negotiation was to effect the severance of petitioner’s
relationship from Winston, and the final settlement and payment
were the culmination of the severance. Moreover, the final
settlement agreement and the $116,000 payment represented the
final settlement of all of the parties’ rights and obligations in
the relationship and in no way were intended to represent
petitioner’s share of partnership income. Accordingly, the
receipt of both payments during December 1994 by petitioner, a
cash basis taxpayer, results in income taxable in petitioner’s
1994 tax year, and we so hold.
II. Were Payments Totaling $48,420 Received by Petitioner
Prior to The Final Settlement Nontaxable Loans or
Taxable Advances?
Petitioner contends that five payments totaling $48,420 and
received between June 1992 and January 1993 were loans from
Winston. His contention is based on the premise that he would
have been required to repay the amounts received, if a settlement
agreement had not been reached. Petitioner also contends that if
the advances are held to be income, they should not be considered
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