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deficiency in their 2003 Federal income tax and a $1,415
accuracy-related penalty under section 6662(a). We decide
whether $25,000 received by Carol Hawkins (petitioner) in
settlement of her lawsuit (lawsuit) related to the termination of
her employment is excluded from her gross income under section
104(a)(2). We hold it is not.
Background
All facts were stipulated or contained in the exhibits
submitted with the parties’ stipulation of facts. Those
stipulated facts and exhibits are incorporated herein by this
reference. Petitioner and her spouse, Cecil Hawkins, filed a
joint 2003 Federal income tax return. They resided in San
Leandro, California, when their petition was filed commencing
this proceeding.
Petitioner was employed as an executive assistant by Alameda
County Fair Association (Alameda) from 1999 to 2002. Shortly
after she was hired, she was told that she would receive a
one-hour paid lunch. In May 2002, she was told that she was not
entitled to a one-hour paid lunch and that she had to repay the
wages she received from May 15, 2001, to May 15, 2002,
attributable to her lunch hours. Petitioner refused to repay
those wages, and she was placed on administrative leave. She was
later told that she had resigned her position even though she was
willing to continue working at Alameda.
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