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reward is offset by $151,489 because, according to an explanation
contained on the return, petitioner “did not constructively
received [sic] these amounts”. The amount reported on line 21 of
petitioner’s 1999 return is a net loss of $2,809.
In the notice of deficiency that forms the basis for this
case, respondent proceeded as though the reward ($148,680) and
the interest earned on that amount while it was on deposit in the
trust fund ($1,299) were omitted from the income reported on
petitioner’s return.2 Other adjustments made in the notice of
deficiency have been agreed to by the parties and need not be
addressed. Furthermore, respondent now concedes that to the
extent that the reward is includable in petitioner’s 1999 income,
she is entitled to a deduction in the same amount. See secs.
212, 461(f).3
Discussion
Absent the complications that followed from Proulx’s
contractual claim against petitioner, the reward would be
includable in petitioner’s 1999 income, and neither party
2 Presumably, this case could be resolved by addressing
petitioner’s entitlement to what is, in effect, a $151,489
deduction, as the $148,680 reward is, in effect, included in the
income reported on petitioner’s return. In fairness to the
parties, however, the Court will address the issues as framed by
the pleadings and briefs.
3 Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for 1999, and Rule references are
to the Tax Court Rules of Practice and Procedure.
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Last modified: November 10, 2007