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deficiency is wrong. See Rule 142(a); Welch v. Helvering, 290
U.S. 111 (1933).3
I. Settlement Was Not Made “On Account Of” Physical Injuries
We must decide whether the $240,000 petitioner received in
1998 was properly excluded from her gross income as damages
received “on account of personal physical injuries or physical
sickness”. Sec. 104(a)(2).4
Section 61, which mandates that gross income includes all
income from whatever source derived absent a specific statutory
exclusion, is to be broadly construed. Commissioner v. Glenshaw
3 Sec. 7491(a) was added to the Internal Revenue Code by the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3001, 112 Stat. 726, effective for court
proceedings arising from examinations commencing after July 22,
1998. Sec. 7491(a)(1) provides that the burden of proof shifts
to the Commissioner in specified circumstances. Petitioner makes
no argument that sec. 7491(a)(1) applies to this case, and we
conclude that it does not. See, e.g., sec. 7491(a)(2). As
relevant herein, sec. 7491(a)(2) provides that sec. 7491(a)(1)
shall apply with respect to an issue only if “the taxpayer has
complied with the requirements under this title to substantiate
any item” and “the taxpayer has maintained all records required
under this title and has cooperated with reasonable requests by
the Secretary for witnesses, information, documents, meetings,
and interviews”. Petitioner has not produced evidence to
establish that any of these requirements are met.
4 We apply sec. 104(a)(2) as amended in 1996 by the Small
Business Job Protection Act of 1996, Pub. L. 104-188, sec.
1605(a), 110 Stat. 1838, effective generally for amounts received
after Aug. 20, 1996. That amendment, in relevant part, added the
modifier “physical” after “personal” and before “injuries”, to
clarify that amounts received on account of personal injuries
must be received for physical injuries and not solely for
emotional distress.
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