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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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