DocketNumber: Docket No. 880-15S.
Citation Numbers: 2016 Tax Ct. Summary LEXIS 87, 2016 T.C. Summary Opinion 87
Judges: VASQUEZ
Filed Date: 12/20/2016
Status: Non-Precedential
Modified Date: 11/20/2020
Decision will be entered for respondent.
VASQUEZ,
Respondent determined a deficiency of $865 in petitioners' Federal income tax for 2012. After a concession,1 the only issue for decision is whether a $3,000 legal settlement petitioner husband received from Wyndham Hotel Group, LLC (Wyndham), is taxable income.
Some of the facts have been stipulated and are so found. The stipulation of facts, the stipulation of settled issues, and the attached exhibits are incorporated by this reference. At the time the petition was filed, petitioners resided in California.
In December 2011 petitioner husband filed a complaint against Wyndham in the Superior Court of California for Los*88 Angeles, California, alleging violations of the
On February 8, 2012, petitioner husband and Wyndham entered into a settlement agreement wherein petitioner husband agreed to release all claims against Wyndham in exchange for $3,000. Petitioner husband received the $3,000 settlement in 2012. However, petitioners did not report the $3,000 as income on their 2012 return.
Respondent issued petitioners a notice of deficiency determining that the $3,000 settlement constituted unreported gross income. Petitioners timely filed a petition with this Court for redetermination. For the reasons set forth below, we sustain respondent's determination.
As a general rule, the Commissioner's determinations in a notice of deficiency are presumed correct, and the taxpayer bears the burden of proving otherwise.2
The first prong of the
As indicated above, we must first determine whether petitioners received damages within the meaning of
Wyndham paid petitioner husband $3,000 pursuant to a settlement agreement to avoid the prosecution of petitioner husband's
We now turn to whether the $3,000 settlement payment was received on account of a personal physical injury or physical sickness. When damages are received pursuant to a settlement agreement, the nature of the claim that was the actual basis for settlement controls whether such amounts are excludable under
If the settlement agreement lacks an express statement of what the settlement amount was paid to settle, we look to the intent of the payor, which we determine on the basis of all the facts and circumstances of the case, including the complaint filed and details surrounding the litigation.
The settlement agreement contains no terms indicating that Wyndham issued the settlement payment on account of petitioner husband's physical injuries*92 or physical sickness. The terms of the agreement state only that petitioner husband released "any and all rights" and claims against Wyndham in exchange for $3,000. This general release does not specifically designate a portion of the settlement payment as a settlement on account of personal physical injury or physical sickness or otherwise make any allusion to compensation for a physical injury or physical sickness. Furthermore, at trial petitioner husband conceded that neither the settlement agreement nor the complaint referenced any physical injury suffered by him.
Since the settlement agreement lacks an express statement of what the settlement payment was for, we next look to the intent of the payor to determine whether the settlement payment was on account of petitioner husband's physical injuries or sickness. In the settlement agreement Wyndham explicitly states that the payment was a "full settlement" of petitioner husband's claim. However, petitioner husband's claim alleged only violations of the
Accordingly, we conclude that petitioners cannot exclude from income the settlement payment received from Wyndham.
In reaching our holding, we have considered all arguments made, and to the extent not mentioned, we consider them irrelevant, moot, or without merit.
To reflect the foregoing,
1. Petitioners concede that they must include in income $461 they received in taxable dividends.↩
2. In the Court of Appeals for the Ninth Circuit, to which an appeal of this case presumably would lie absent a stipulation to the contrary,
3. Pursuant to an amendment to
4. We apply the new test rather than the
Mason K. Knuckles and Bernice A. Knuckles v. Commissioner ... , 349 F.2d 610 ( 1965 )
Robinson v. Commissioner , 70 F.3d 34 ( 1995 )
Johnny Weimerskirch v. Commissioner of Internal Revenue , 596 F.2d 358 ( 1979 )
Paul S. Lindsey, Jr. Kristen Lindsey v. Commissioner of ... , 422 F.3d 684 ( 2005 )
Cathy Miller Hardy v. Commissioner of Internal Revenue , 181 F.3d 1002 ( 1999 )
Gavin Polone v. Commissioner of Internal Revenue , 479 F.3d 1019 ( 2007 )
Perez v. Comm'r , 144 T.C. 51 ( 2015 )
Welch v. Helvering , 54 S. Ct. 8 ( 1933 )
Commissioner v. Glenshaw Glass Co. , 75 S. Ct. 473 ( 1955 )
United States v. Centennial Savings Bank FSB , 111 S. Ct. 1512 ( 1991 )
United States v. Burke , 112 S. Ct. 1867 ( 1992 )
Commissioner v. Schleier , 115 S. Ct. 2159 ( 1995 )
Weimerskirch v. Commissioner , 67 T.C. 672 ( 1977 )
Petzoldt v. Commissioner , 92 T.C. 661 ( 1989 )