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$1,446 payment from the FDIC should have been included in
petitioners’ 2002 gross income and increased petitioners’ taxable
income by that amount to reflect the payment. Petitioners assert
the payment, which represents “compensatory damages resulting
from the litigation of a constitutional tort (unlawful
demotion)”, is excludable from gross income under section
104(a)(2).
Discussion
Section 61 provides that “gross income means all income from
whatever source derived”. Gross income is an inclusive term with
broad scope, designed by Congress to “exert * * * ‘the full
measure of its taxing power.’” Commissioner v. Glenshaw Glass
Co., 348 U.S. 426, 429 (1955) (quoting Helvering v. Clifford, 309
U.S. 331, 334 (1940)). Compensation for services is enumerated
among the items of income included under section 61, as is
interest. Sec. 61(a)(1), (4); secs. 1.61-2(a)(1), 1.61-7(a),
Income Tax Regs.
Statutory exclusions from income are matters of legislative
grace and are narrowly construed. Commissioner v. Schleier, 515
U.S. 323, 328 (1995); Mostowy v. United States, 966 F.2d 668, 671
(Fed. Cir. 1992). Further, “exemptions from taxation are not to
be implied; they must be unambiguously proved.” United States v.
Wells Fargo Bank, 485 U.S. 351, 354 (1988). Taxpayers seeking an
exclusion from income must demonstrate they are eligible for the
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