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agreement stated that the parties entered into it solely to avoid
the burden and expense of litigation.
Ivy Tech paid $25,000 to petitioner in 2002 pursuant to the
settlement agreement. Petitioner paid $8,332 of that amount as
attorney’s fees she had incurred in obtaining the recovery.
Respondent received a Form 1099-MISC, Miscellaneous Income, from
Ivy Tech showing that it had paid $25,000 to petitioner in 2002.
Petitioner received a Form W-2, Wage and Tax Statement, for 2002,
but did not receive a Form 1099. She did not report the $25,000
payment as income on her 2002 Federal income tax return.
OPINION
A. Contentions of the Parties and Background
Petitioner contends that $25,000 that she received from Ivy
Tech in 2002 in settlement of a lawsuit is excluded from income
because (1) section 104(a)(2) so provides, and (2) Ivy Tech
breached the settlement agreement.2
Gross income generally does not include damages received
(whether by suit or agreement) on account of personal physical
injuries or physical sickness. Sec. 104(a)(2). For petitioner
to exclude the $25,000 payment under section 104(a)(2), she must
show that the damages were received on account of personal
2 Respondent’s determination is presumed correct and
petitioner bears the burden of proof on all issues in this case.
See Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Petitioner does not contend that respondent bears the burden of
proof under sec. 7491(a).
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