- 7 - interference with contract, negligence, defamation, promissory estoppel, invasion of privacy, or any other theory, whether legal or equitable. The settlement agreement did not allocate the $7,650 settlement payment among Mrs. Prasil’s causes of action or between monetary damages, emotional damages, and physical damages. Pursuant to the settlement agreement, Mrs. Prasil received a transmittal letter dated February 12, 1999, from Heartland’s attorney enclosing a copy of the fully executed settlement agreement and a settlement check from Heartland dated February 10, 1999, in the amount of $7,650. Petitioners deposited the settlement check in their checking account. Subsequently, Heartland issued a Form 1099-MISC, Miscellaneous Income (Form 1099), reporting “nonemployee compensation” of $7,650 paid to Mrs. Prasil in 1999. At trial, petitioners testified that they did not receive the Form 1099-MISC, but they acknowledged receipt of the $7,650 settlement payment from Heartland in 1999. Petitioners timely filed a joint Form 1040, U.S. Individual Income Tax Return, for 1999 using the cash basis method of accounting. In that return, petitioners excluded from gross income the $7,650 settlement payment that Mrs. Prasil received from Heartland. On December 12, 2001, respondent issued a notice of deficiency for 1999 to petitioners. In the notice of deficiency, respondent determined, inter alia, that petitioners failed toPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011