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Payable to petitioner with no $157,000
amounts withheld
Payable to petitioner as wages, 50,000
with payroll tax withheld
Payable to petitioner’s attorneys 268,000
for legal fees and costs with no
amount withheld
Page 3 of the settlement agreement provided that petitioner
“acknowledges that she considers the payment of the check payable
to her without withholdings [the $157,000 payment] to be
compensation for personal injury (i.e. emotional distress)
damages only”.
Respondent issued petitioner a notice of deficiency for 2002
determining that $157,000 of the settlement was not excludable
from her gross income pursuant to section 104(a)(2).
OPINION
I. Deficiency
A. Burden of Proof
Generally, the taxpayer bears the burden of proving the
Commissioner’s deficiency determinations incorrect. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). Petitioner has
neither claimed nor shown that she satisfied the requirements of
section 7491(a) (to shift the burden of proof to respondent).
Accordingly, petitioner bears the burden of proof. See Rule
142(a).
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Last modified: May 25, 2011