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Background
All facts were stipulated.1 The stipulated facts and the
exhibits submitted therewith are incorporated herein by this
reference. Petitioners are husband and wife. They resided in
Munith, Michigan, when their petition was filed.
Petitioners timely filed a joint 1999 Federal income tax
return. They did not report on that return that petitioner had
received $30,000 from General Motors, Inc. (GM) during 1999
stemming from a complaint that she had filed in the Michigan
Circuit Court for the County of Wayne against GM and one of its
employees, James Pennington (Pennington). The complaint alleged
that petitioner’s suit was one “of trespass” and asserted that GM
and Pennington were liable to petitioner for sexual harassment
primarily in violation of the Elliott-Larsen Civil Rights Act,
Mich. Comp. Laws, secs. 37.2101-37.2804 (2001). The complaint
contained three counts, one against GM and Pennington, and the
other two against GM alone. With respect to all three counts,
petitioner prayed solely for an award of “damages for mental
anguish, humiliation, embarrassment, and loss of benefits and
other economic advantages of employment.”
Petitioner’s complaint against GM and Pennington went to
mediation before trial. Following mediation, GM settled this
1 Petitioners attached to their brief an affidavit of their
counsel. We give no consideration to this affidavit. See Rule
143(b).
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