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Under the terms of the policy, long-term disability benefits
were based on petitioner’s monthly basic earnings at the time
that he became totally disabled. The benefit payments that
petitioner received at the time of his disability, as well as the
payments made pursuant to the settlement agreement, were based on
the terms of the policy and the coverage it provided and not by
reference to the nature of petitioner’s injury. Petitioner has
offered no evidence to the contrary. Additionally, a fact deemed
admitted under Rule 90 is that Connecticut General’s payment of
$269,474 to petitioner was in satisfaction of the insurance
company’s requirement to pay 66-2/3 percent of his salary as a
disability payment. Therefore, the exception under section
105(c) is not applicable.
Finally, on brief, petitioner argues that “on settlement of
that case * * * [he] did not receive all that money, oh no, he
received much, much less money from that case.” He argues that
Quadrino & Schwartz retained the larger portion of the lawsuit
settlement and denied him access to most of his funds.
Additionally, petitioner argues that the $141,565.77 payment made
to petitioner on February 14, 2005, from the Quadrino & Schwartz
escrow account should not be taxable to him in 2002 because he is
a cash basis taxpayer.
As a general rule, when a taxpayer’s litigation recovery
constitutes income, the taxpayer is taxable on the contingent fee
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