- 14 -
be gross income unless it can be demonstrated that the accession
to wealth is specifically excluded by law. See Commissioner v.
Glenshaw Glass Co., 348 U.S. 426, 431 (1955).
Petitioner was relieved of his obligation to pay the
remaining $325,000 due on his promissory note to Prudential and,
therefore, realized income from the forgiveness of debt, unless
petitioner can show that the income may be excluded.6 Petitioner
contends that section 104(a)(2) should apply to exclude the
$325,000 from his income. Section 104(a)(2) provides:
SEC. 104(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;
* * * * * * *
* * * Paragraph (2) shall not apply to any punitive
damages in connection with a case not involving
physical injury or physical sickness.
The term “damages received”, as used in section 104(a)(2),
is defined as an amount received “through prosecution of a legal
suit or action based upon tort or tort type rights, or through a
settlement agreement entered into in lieu of such prosecution.”
6 The exclusions from gross income set forth in sec.
108(a)(1) are not applicable in this case.
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011