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The agreement between petitioner and DaimlerChrysler was
finalized in October 2002. It was signed by petitioner on
October 15, 2002, and by a DaimlerChrysler agent on October 28,
2002. By signing the agreement, petitioner agreed with the
description of her allegations in the complaint “That during
[petitioner’s] employment with Employer, she was harassed by a
fellow employee and that, as a result, she has suffered personal
injury and emotional distress.”
The agreement specifically stated DaimlerChrysler would
issue 1099 forms, and that petitioner would hold DaimlerChrysler
harmless “With respect to withholding or any applicable income
and employment taxes in connection with the consideration paid
hereunder.” Petitioner attested that she was given 3 weeks to
review the agreement and encouraged to seek counsel. Petitioner
did receive legal advice3 regarding the settlement, but she did
not follow that advice.
Deficiency
Respondent determined a deficiency in petitioners’ 2002
Federal income tax of $2,164. Respondent received from Daimler-
Chrysler a Form 1099-MISC, Miscellaneous Income, issued to
3Petitioner’s counsel for the lawsuit and settlement
negotiations with DaimlerChrysler is also representing
petitioners in this case. He recommended that petitioner not
accept the settlement.
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