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years of service. Because of the representation that the
nonindustrial disability benefits did not constitute gross
income, and considering further that the litigation that was
threatened by the city could be protracted and the outcome
uncertain, petitioner and his attorney agreed that petitioner
would accept the nonindustrial benefits. He began drawing the
nonindustrial benefits in 1997 and received $16,617 that year.
On the Federal income tax return prepared by petitioner for 1997,
the $16,617 was reported as pension income, but, on line 21 of
Form 1040, U.S. Individual Income Tax Return, he listed a
negative income amount of $16,617, which he described on line 21
of the return as “nontaxable pension in lieu of workers comp.”
In the notice of deficiency, respondent determined that the
$16,617 constituted gross income.2
In general, gross income includes “all income from whatever
source derived”. Sec. 61(a). However, section 104(a)(1)
excludes from gross income “amounts received under workmen’s
compensation acts as compensation for personal injuries or
sickness”.
2Since this issue involves a question of law as to whether
the pension income is taxable, and there are no facts in dispute,
the Court decides the issue without regard to the burden of
proof. See sec. 7491(a). As to the sec. 6651(a)(1) addition to
tax, the burden of production is on respondent under sec.
7491(c). However, the burden of proof remains on petitioner to
persuade the Court the imposition of the addition to tax is
incorrect. Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001).
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