- 41 -
II. Exclusion pursuant to Section 104(a)(2)
Respondent determined that the May 1996 payment, the May
1997 payment, and the November 1998 payment are not excludable
pursuant to section 104(a)(2). Respondent also denied
petitioner’s refund claim (relating to the November 1996 payment)
for the same reason. Petitioner challenges respondent’s
determination and the denial of his refund claim.21
A. Section 104
As a general rule, the Internal Revenue Code imposes a
Federal tax on the taxable income of every individual. Sec. 1.
Section 61(a) specifies that, “Except as otherwise provided”,
gross income for purposes of calculating such taxable income
means “all income from whatever source derived”. The Supreme
Court has long reiterated the sweeping scope of section 61.
Commissioner v. Schleier, 515 U.S. 323, 327 (1995); Commissioner
v. Glenshaw Glass Co., 348 U.S. 426, 429-431 (1955).
Section 104, in contrast, provides an exception with respect
to compensation for injuries or sickness. Such exclusions from
gross income are construed narrowly. Commissioner v. Schleier,
supra at 328; United States v. Burke, 504 U.S. 229, 248 (1992)
(Souter, J., concurring in judgment); Banaitis v. Commissioner,
340 F.3d 1074, 1079 (9th Cir. 2003), affg. in part and revg. in
part T.C. Memo. 2002-5. Before its amendment on August 20, 1996,
21 We note that we have jurisdiction to determine whether
there was an overpayment of tax for 1996. Secs. 6512(b),
7422(e).
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