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Additionally, the IRS determined accuracy-related penalties
under section 6662(a) for all of the years in issue and an
addition to tax under section 6651(a) for failure to file timely
in 1999.
On February 9, 2005, respondent requested leave of the Court
to file an amendment to the answer to include as gross income to
petitioner the $4,586,000 of attorney’s fees paid to Brothers
under the terms of the settlement agreement.
OPINION
Burden of Proof
At trial, the parties agreed that petitioner bears the
burden of proof on all of the issues in these cases, except:
(i) The issue raised by the proposed amendment to the answer of
whether petitioner should have included the contingent attorney’s
fees in his gross income in 1995 and (ii) any new matter or new
issue not raised in respondent’s trial memorandum. (Thus,
petitioner has agreed that respondent’s burden of production
under section 7491(c) with respect to penalties has been
satisfied.)
Payments Received Under the Settlement Agreement
Section 61(a) includes in gross income “all income from
whatever source derived”, unless otherwise provided. Section
104(a)(2) provides otherwise. Before it was amended by the Small
Business Job Protection Act of 1996, Pub. L. 104-188, sec. 1605,
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