Reginald James Smith - Page 3

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          Revenue Code in effect for the year in issue, and all Rule                  
          references are to the Tax Court Rules of Practice and Procedure.            
               Respondent determined a deficiency in petitioner’s 2004                
          Federal income tax of $12,546.  Respondent also determined an               
          accuracy-related penalty in accordance with section 6662(a) in              
          the amount of $2,509 for 2004.  After concessions,1 the issues              
          for decision are:  (1) Whether a settlement payment received by             
          petitioner is excludable from gross income under section 104(a);            
          and (2) whether petitioner is liable under section 6662(a) for an           
          accuracy-related penalty.                                                   
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and attached exhibits are incorporated             
          herein by this reference.  At the time of the filing of the                 
          petition, petitioner resided in Oakland, California.                        
               Petitioner worked as a warehouse employee at Onyx                      
          Environmental Services (hereinafter Onyx) from April 15, 2002               
          through November 2002 when he was terminated.  On December 16,              
          2003, petitioner and another individual filed a complaint for               

               1 Respondent concedes that petitioner is not liable for                
          self-employment tax.  Additionally, respondent introduced a Form            
          4340, Certificate of Assessments, Payments, and Other Specified             
          Matters, showing an assessment of tax on July 24, 2006, 2 months            
          after petitioner timely filed a petition with this Court.                   
          Respondent was uncertain as to the basis for the assessment.  We            
          presume that respondent has abated or will abate the assessment             
          and will make no further assessments until the decision of the              
          Court is final.  See sec. 6213(a).                                          

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