-8-
prerequisite steps would the settlement payment be sent. By
requiring petitioner to take these steps, Universal was in fact
buying their release from having to fully litigate petitioner's
discrimination claims.
While the Court does not dismiss the illnesses that
petitioner experienced during her employment, the evidence
supports the conclusion that the settlement payment was intended
by Universal to be nonwage income and not to compensate
petitioner for any physical injuries or physical sickness.
Since the Court has found that the settlement proceeds were
not based on personal physical injuries or physical sickness,
there is no need to determine whether "the underlying cause of
action giving rise to the recovery * * * [was] 'based upon tort
or tort type rights.'" Commissioner v. Schleier, 515 U.S. at 337
(quoting section 1.104-1(c), Income Tax Regs.). The Court holds
that the $50,000 damage award is not excludable from gross income
under section 104(a)(2).
Penalty Under Section 6662(a)
The Commissioner has the "burden of production in any court
proceeding with respect to the liability of any individual for
any penalty" under section 6662(a). Sec. 7491(c); Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001). To meet this burden,
the Commissioner must come forward with sufficient evidence
indicating that it is appropriate to impose the penalty. Higbee
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