- 52 -
1996). Accordingly, the receipt of the payments in 1997 and 1998
by petitioner, a cash basis taxpayer, results in income taxable
in petitioner’s 1997 and 1998 tax years.27 See Knoll v.
Commissioner, supra.
Furthermore, petitioners argue that the three payments had
an ascertainable fair market value in May 1996. Even if
petitioner’s execution of the settlement agreements constituted a
disposition of property,28 there is no evidence in the record of
the fair market value of the three payments in May 1996. No
expert reports were submitted, and no experts testified at trial
regarding the fair market value of the three payments in May
1996. There is not even lay testimony regarding the fair market
value of the three payments in May 1996. Accordingly, the
evidence does not establish that the three payments, or UTA’s
obligation to make the three payments, had an ascertainable fair
market value in May 1996.29 The evidence does not establish that
27 Petitioner does not argue that the $2 million lump-sum
and the back-end payments paid to settle the breach of contract
claim should also be included in petitioner’s income in 1996
(thereby increasing the deficiency for 1996) under his amount
realized theory.
28 We have previously rejected the argument that a
taxpayer’s execution of an agreement to settle a lawsuit
regarding his termination by his former employer constitutes a
disposition of property. Alexander v. Commissioner, T.C. Memo.
1995-51, affd. 72 F.3d 938 (1st Cir. 1995); see Nahey v.
Commissioner, 111 T.C. 256 (1998), affd. 196 F.3d 866 (7th Cir.
1999).
29 The marketability of these payments is further suspect
given the confidentiality (nondisclosure) provisions contained in
(continued...)
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