Douglas A. Gibson - Page 2

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          penalty for 2002.1  After a concession,2 the issues remaining for           
          decision are (1) whether $175,000 petitioner received during 2002           
          in connection with a settlement of a lawsuit is excludable from             
          gross income pursuant to section 104(a)(2), and (2) whether                 
          petitioner is liable for an accuracy-related penalty pursuant to            
          section 6662.                                                               
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and the attached exhibits are                      
          incorporated herein by this reference.  At the time he filed the            
          petition, petitioner resided in Sun City, California.                       
               In 1991, petitioner’s wife inherited a home in Sun City,               
          California (the Sun City residence), in the County of Riverside             
          (the county).  In late 1991, petitioner, his wife, and their                
          children (the Gibsons) moved into the Sun City residence.                   
               The Sun City residence was in an area zoned as a “Senior               
          Citizen Development” (SCD) by the county.  A county ordinance               
          provided that an SCD zoning restriction placed a certain age-               
          related residency restriction (the restriction) on persons                  

               1  Unless otherwise indicated, all section references are to           
          the Internal Revenue Code, and all Rule references are to the Tax           
          Court Rules of Practice and Procedure.                                      
               2  Petitioner conceded that the Social Security benefits he            
          received during 2002 are taxable.                                           

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