Barbara Bond - Page 7

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               3.   Conduct of Ivy Tech                                               
               Petitioner contends that she was not required to include the           
          $25,000 payment in income because Ivy Tech violated the                     
          settlement agreement by (1) disclosing its terms to others or by            
          making disparaging remarks about her and (2) failing to send a              
          Form 1099 to her.  We disagree.  Ivy Tech’s conduct after paying            
          the $25,000 settlement to petitioner is not relevant to whether             
          she must include the $25,000 in income, and her nonreceipt of a             
          Form 1099 required by the settlement agreement to be sent to her            
          does not convert a taxable item to a nontaxable item.  See Vaughn           
          v. Commissioner, T.C. Memo. 1992-317, affd. without published               
          opinion 15 F.3d 1095 (9th Cir. 1993).                                       
               4.   Conclusion                                                        
               We conclude that the $25,000 that petitioner received from             
          Ivy Tech in 2002 was not paid on account of personal physical               
          injuries or physical sickness and is thus not excluded from                 
          income under section 104(a)(2).4                                            
               To reflect the foregoing,                                              
                                                       Decision will be               
                                                  entered under Rule 155.             

               4  In the Rule 155 computation, the parties should consider            
          whether petitioner is entitled to an itemized deduction for the             
          $8,332 in attorney’s fees that she incurred in connection with              
          the settlement.  See Commissioner v. Banks, 543 U.S. __, __, 125            
          S. Ct. 826, 830 (2005).                                                     

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