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The issues for decision are: (1) Whether under section 104
petitioner may exclude from gross income $89,840 in proceeds from
a legal settlement; (2) whether petitioner is liable for the
section 6651(a)(1) addition to tax for failure to file on time a
Federal income tax return for 1997; and (3) whether petitioner is
liable for the accuracy-related penalty under section 6662(a).
Some of the facts in this case have been stipulated and are
so found. Petitioner resided in Deer Park, New York, at the time
he filed his petition.
From 1994 to 1996, petitioner worked for a bus contractor,
ATC-Vancom of Nevada Limited Partnership, Inc. (ATC), in
Laughlin, Nevada. Mr. Shawn Brophy was petitioner’s supervisor
at ATC. In 1996, petitioner was living with Diane Macarino, her
two sons from a prior marriage, and petitioner and Ms. Macarino’s
son, Joseph. Petitioner invited Mr. Brophy to live on
petitioner’s property and Mr. Brophy stayed about 2 months.
Then, Mr. Brophy moved Ms. Macarino and all three children out of
petitioner’s home and took them with him. Obviously, petitioner
was concerned and upset about this turn of events. Petitioner’s
father suffered a stroke. About that time, petitioner was
diagnosed with and treated for mental illness and high blood
pressure. Petitioner was hospitalized for these conditions for
approximately 10 days in 1996.
Petitioner was terminated from his ATC employment in 1996.
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