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gross income for purposes of calculating taxable income means
“all income from whatever source derived”. The scope of this
definition is broad, typically reaching any accretions to wealth.
Commissioner v. Schleier, 515 U.S. 323, 327 (1995); Commissioner
v. Glenshaw Glass Co., 348 U.S. 426, 429-431 (1955). Among the
items expressly classified as income under section 61(a) are
“Compensation for services, including fees, commissions, fringe
benefits, and similar items;” and “Gains derived from dealings in
property”. Sec. 61(a)(1), (3).
The rate of tax imposed on such income items depends, inter
alia, upon their characterization as either ordinary income or
capital gain. See sec. 1. Compensation for services rendered is
defined and has long been recognized as ordinary income. Pounds
v. United States, 372 F.2d 342, 345-346 (5th Cir. 1967); Farr v.
Commissioner, 11 T.C. 552, 560 (1948), affd. sub nom. Sloane v.
Commissioner, 188 F.2d 254 (6th Cir. 1951). Capital gain
treatment, on the other hand, is premised on the existence of a
sale or exchange of a capital asset. Secs. 1221 and 1222. A
capital asset is property held by a taxpayer that is not covered
by one of eight specifically enumerated exclusions. Sec. 1221.
B. Analysis
The Court concludes that the $50,512 payment received by
Mr. Lowe under KEEAP II constitutes ordinary income. The
evidence indicates that the payment was in the nature of
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