- 31 -
Therefore, section 7491 does not apply, and the burden of proof
remains with petitioners.
III. Determinations of Gross Income
The definition of gross income under section 61(a) broadly
encompasses any accession to a taxpayer’s wealth. The scope of
gross income is sweeping. United States v. Burke, 504 U.S. 229,
233 (1992); Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429
(1955). Exclusions from gross income are narrowly construed.
Commissioner v. Schleier, 515 U.S. 323, 328 (1995); United States
v. Burke, supra at 248 (Souter, J., concurring in judgment);
Taggi v. United States, 35 F.3d 93, 95 (2d Cir. 1994).
Therefore, settlement proceeds constitute gross income unless the
taxpayer proves they are specifically excepted by another
statutory provision.
Section 104(a)(2) provides for an exclusion from gross
income:
SEC. 104. COMPENSATION FOR INJURIES OR SICKNESS.
(a) In General.--Except in the case of amounts
attributable to (and not in excess of) deductions
allowed under section 213 (relating to medical, etc.,
expenses) for any prior taxable year, gross income does
not include--
* * * * * * *
(2) the amount of any damages received
(whether by suit or agreement and whether as lump
sums or as periodic payments) on account of
personal injuries or sickness * * *
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