-7-
and complies with the requirements of section 7491(a)(2)(A) and
(B) to substantiate all items at issue, maintain required
records, and cooperate with reasonable requests of respondent.
We find it unnecessary to decide whether petitioners have met the
prerequisites of section 7491, because the record in this case is
not evenly weighted and the resolution of the issues in
controversy does not depend upon which party bears the burden of
proof. We render a decision on the preponderance of the evidence
in the record.
2. Applicability of Section 104(a)(2)
Section 61(a) provides that gross income includes all income
from whatever source derived. While it is axiomatic that section
61(a) broadly applies to any accession to wealth, statutory
exclusions from income are narrowly construed. See Commissioner
v. Schleier, 515 U.S. 323, 327 (1995); United States v. Burke,
504 U.S. 229, 233 (1992); Commissioner v. Glenshaw Glass Co., 348
U.S. 426, 431 (1955). As applicable here, section 104(a)(2)
excludes from gross income, among other items, damages received
pursuant to a settlement “on account of personal physical
injuries or physical sickness”.
Qualification for the section 104(a)(2) exclusion is
predicated on a bipartite analysis, examining whether (1) the
underlying claims were based on tort or tort type rights, and (2)
the damages were received on account of personal physical
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