Milton D. and Linda M. Peebles - Page 8

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          Vaughn v. Commissioner, T.C. Memo. 1992-317, affd. without                  
          published opinion 15 F.3d 1095 (9th Cir. 1993).                             
               There was trial testimony regarding the degree of physical             
          intimidation (if any) petitioner brought to bear against Dr.                
          Hestir when petitioner discovered the affair and received the               
          payment of $25,000.  We need not resolve those factual disputes             
          to conclude that the payment was not a gift.                                
          C.   Conclusion                                                             
               We conclude that the $25,000 payment by Dr. Hestir was not             
          the result of detached and disinterested generosity or paid out             
          of affection, respect, admiration, or charity.  Instead it was              
          paid to avoid a lawsuit, to avoid public and professional                   
          embarrassment, and to assuage his own feelings of guilt or moral            
          obligation.  Therefore, the $25,000 payment in 1999 is not a gift           
          and is includable in petitioners’ gross income for that year.               
               To reflect the foregoing,                                              

                                                       Decision will be               
                                                  entered for respondent.             















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