Gavin Polone - Page 1

                                 T.C. Memo. 2003-339                                  

                               UNITED STATES TAX COURT                                

                             GAVIN POLONE, Petitioner v.                              
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 12665-00.           Filed December 16, 2003.                

                    P was a high-profile, successful Hollywood talent                 
               agent.  P represented numerous Hollywood stars.  Until                 
               1996, P worked for a major Hollywood talent agency (U).                
                    On Apr. 21, 1996, U fired P.  U leaked P’s                        
               termination to the media.  The press coverage of P’s                   
               termination was extensive and defamatory to P.                         
                    P immediately hired attorneys to represent him                    
               against U.  P’s attorneys prepared a complaint                         
               alleging, among other things, defamation and breach of                 
               contract.  P and U engaged in settlement negotiations                  
               that were extremely hostile, adversarial, and                          
               acrimonious.  P and U quickly settled P’s claims.  U                   
               agreed to pay $4 million to settle the defamation claim                
               and $2 million plus “back-end” payments to settle the                  
               breach of contract claim.  P was paid the $4 million in                
               four installments of $1 million in May 1996, November                  
               1996, May 1997, and November 1998.                                     

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