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“This amount [$161,988] represents payments received for non-
punitive damages via Metropolitan Life. No Form 1099 was issued,
further supporting Taxpayer’s position that such amount is not
taxable. See attached statement for further clarification of
Taxpayer’s position.” The attached statements were as follows:
The Settlement Agreement included additional damages
associated with the Final Judgment in Cause No.
480,701, be provided to George Green (Plaintiff) from
annuity contracts purchased by the State of Texas, the
owner of the annuities as follows:
(Non-punitive) 1. “The State shall fund annuities for
additional damages associated with the
Final Judgment in Cause No. 480,701
which in turn shall pay to Plaintiff
monthly installments . . . in the amount
of $13,499”. ($161,988 yr)
(Punitive) 2. “For all other damages, including
punitive, pre-judgment and post-judgment
interest, the State shall fund an
annuity which in turn shall pay
Plaintiff monthly installments . . . in
the amount of $7,924”. ($95,088 yr)
The annuity payments in the sum of $161,988
received in 1997 represent additional damages other
than punitive and interest, and are excluded from
income under sec. 104(a)2 [sic].
Additionally, with respect to petitioner’s interest in Green
Capital, petitioner reported losses in the amount of $41,579.
With respect to petitioner’s interest in TS Capital, petitioner
reported losses in the amount of $45,017. Petitioner’s return
for 1997 showed tax due in the amount of $8,066.
On October 15, 1999, petitioner filed his income tax return
for 1998. On his return, which was prepared by Hunter & Atkins,
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