T.C. M em o . 2 0 1 7 -1 2 9

UNITED STATES TAX COURT

LLOYD ANTHONY RAJ COOM AR, Pet i t io n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 3 6 68 -1 6
. Fi l edJ u l y 3 , 2 0 1 7.

Ll o y dAn th o n y

Rajco o m ar, p ro s e. Ch ri st o p h er D. Dav i s an dGeral dM ack ey , fo r res p o n den t .

M EM ORANDUM FINDINGS OF FACT AND OPINION LAUBER, J u d g e: Th e In t ern al Rev en u e Serv i ce (IRS o r res p o n d en t ) d et erm i n ed a d efi ci en cy

o f $ 3 ,7 80 wi th res p ectt o p et i t io n er’ s Fed eral i n co m e t ax fo r 2 0 1 3
. 1 Pet i t i o n er h as co n ced edal l o f t h e ad ju st m en t s s etfo rt h i n th e n o t i ce o f

1 Al l s t atut o ry

referen ces are t o th e In t ern al Rev en u e Co de i n effect fo r t h e (co n ti n u ed ...)- 2
-

[* 2 ] d efi ci en cy . Th e s o l e i s s u e rem ai n i n g fo r d eci s i o n , wh i ch p et i t io n er rai s es b y way o f o ffs et , i s wh et h er h e m ay ex cl u d e fro m

g ro ss i nco m e u nd er s ect i o n 1 0 4 (a)(2 ), as d am ag es recei v ed“ o n acco u n to f p ers o n al p h y s i cal i n juri es o r p h y s i cal si ckn es s ,” p ro ceed s th ath e recei v edu nd er a s et tl em en t ag reem en twi th h i s fo rm er em

p l o y er. Co n cl u d i n g as we d o th at the an s wer t o t h i s qu es t i o n i s “ n o ,” we wi l l s u s t ai n th e d efi ci en cy . FINDINGS OF FACT Th e p art i es fi l eda s t ip ul at i o n o f fact s wi th at t ach ed ex hi b i t s th ati s i n co rp o rat edb y

th i s referen ce. Pet i ti o n er res i d edi n New Yo rkwh enh e fi ledh i s p et i
t i on . Befo re 2 0 1 3 p et i ti o ner was em p lo y edb y M o un tSai n t M ary Co l l eg e (co l
l eg e) as a cam

p u s s afet y

o ffi cer. In J an u ary

2 0 11 h e was s eri o us l y

i n juredi n a car acci den tu n rel at edt o h i s em p l oym en t . Th e t ru ck i ng co m pan y wh os e v eh i cl e rearen d edh i s car ev en tu al l y

p ai dh i m a $ 1 .7 5 m i ll i on d am ag e award , wh ich h e recei v edi n 2 0 1 5 . Th atreco v ery i s n o tati s s ue h ere. Pet i t i o ner h ad s ev eral s u rg eri es b ecau s e o f t h e i n juri es h e s u ffered i n th e car
cras h. Th es e i n

juri es cau sed h i m

t o g o o n s h ort -t erm

d i s ab i l i ty l eav e fro m

th e

1 (...co n t in u ed ) t ax y ear i n i s s u e, an dal l Ru l e referen ces are t o t h e Tax Co urtRu l es o f Pract i ce an d Pro cedure. W e ro u n d al l m o n et ary am o u n t s t o th e n eares td ol l ar.- 3
-

[* 3 ] co l l eg e i n Oct ob er 2 0 12
. In Feb ru ary 2 0 1 3 h e h adan k l e s u rg ery , al so
co n nect edwi th th e i n

juri es h e s u ffered i n th e car cras h , an dh e rem ai n edo n s h o rt t erm d i s ab i l i ty

l eav e. OnAp ri l 1 7 , 2 0 1 3 , th e co l leg e i nfo rm edh i m th ath e was
n ear t he en do f h i s m ax i m u m d i s ab i l i ty

l eav e p eri o dan dthat , i f h e d i dn o tretu rn t o wo rk b y Ap ri l 3 0 , h i s em

p l o ym en two u l db e t erm in at ed
. Pet i t i o ner rep l i ed th at , i f h e ret u rn edt o wo rk , h e wo ul db e u n ab le t o p erfo rm h i s u s u al p at ro l du t i es b ecau s e h e n eed edt o u s e cru t ch es o r wear a p ro t ect iv e b o o t . He as k edt o b e s h i ft edt o a m o re s ed en t ary p o s i t i o n . Th e co l l eg e d ecl i n edt o p erm i ts u ch a ch an ge, i n s is t i ng th ath e ret u rn t o wo rk“ wi th o u tres tri ct i o n s .” He d i dn o t return t o wo rk b y th e d ead l i ne, an dh e was fi red
. In res p o n s e t o h i s fi ri n g p et i t i o n er fi l eda co m p l ai nti n M ay

2 0 1 3 wi th th e New Yo rk St at e Di v is i o n o f Hu m an Ri g h t s (Di v i s i o n ) an d a s im i l ar co m p l ai n t wi th th e Equ al Op p o rtu n it y Em p l o ym en t Co m

m i s si o n (EEOC). In th e Di v i s i o n
co m p l ai n t , wh i ch h e cap t i o ned“ Des cri p t io n o f Di s cri m i n at i o n ,” h e al leg edth at

“ th e co l leg e d i s cri m i nat edag ai n s tm e o n th e b as i s o f m y d is ab i l i ty ” an dth ati th ad fai l edt o o ffer h im

a “ reas o nab l e acco m

m o d at i on .” In s up p o rto f t hi s cl ai m h e ci t ed the co l l eg e’ s Ap ri l 1 7 l et ter, wh i ch s t at ed : “ Yo u wi ll b e ex p ect edt o retu rn t o
wo rkwi tho u tres tri ct i o n s o r face t erm i n at i o n o f em p l o y m en t . ”- 4
-

[* 4 ] Pet i t i o ner al l eg edthatCau cas i an em p l o y ees h adb een al l o w edth e t y p e o f

“ reas o nab l e acco m

m o dat i o n ” t h atth e co l l eg e refu s ed t o m ak e fo r h i m . He d i d n o t al l eg e th ath e h ad s uffered an y p h y s i cal i n

jury fo r wh i ch th e co l l eg e was res p o n s i bl e, an dh e d i dn o ts eek co m p en s at i o n fo r an y

p h y s i cal i n

jury . Rat h er, h e u rg ed th e Di v i s i o n t o “ i n v es t i g at e an dd efen dm e ag ai n s tth e d i s cri m i n at i o n t h atI faced b as edo n m

y d is ab i li t i es wh i l e u n der t h e * * * [co l l eg e’ s ] em pl o y . ” In Sep tem

b er 2 01 3 p et it i o n er an dth e co l leg e s et t l edth i s d is pu t e b y ex ecu t i n g a “ Co n ci l i at i o n Ag reem en tan dGen eral Rel eas e.” Th i s d o cu m en t reci t ed th atp et i t i o n er h adfi l ed co m p lai n t s wi th th e Di v i s io n an dthe EEOC al l eg in g th at th e co l l eg e h ad“ co m

m i t t ed u n l awfu l d i s cri m i n at o ry p ract i ces rel at i n g t o h i s em p l o ym en tb ecau se o f d i sab i l i ty .” Wh i l e t h e Di vi s i o n h ad m ad e n o fi n d i n g s reg ard
i n g th es e al l eg at io n s , the p art i es “ d es i re[d ] t o res o l v e al l p en d i ng l i t i g at i o n ” b y
ex ecu t i n g th e s et t l em en t. In ex ch an g e fo r a m o n et ary p aym en t p et i t io n er ag reedt o wi th draw wi th p reju d i ce t h e co m

p l ai n t s h e h adfi l edwi th th e Di v is i o n an dth e EEOC. He ag reed t o rel eas e an y

cl ai m h e m i g h th av e h adag ai n s tth e co l l eg e fo r “ co m p en s at i o n i n
an y fo rm ” ari s i n g fro m

“ th e t erm an dco n d i t io n s o f * * * [h i s ] em p l o ym en t ” o r t h e t erm i n at i o n o f h i s em

p l o ym en t . He s p eci fi cal l y rel eas edan y

cl ai m s ari s i n g u n d er
an y Fed eral o r St at e l aw “ p ro h ib i t i n g em p l o ym en td i s cri m i n at i o n b as edup o n ag e,- 5
-

[* 5 ] race, co l o r, s ex , rel i g i o n , h an d i cap o r d i s ab i l i ty .” Th e ag reem en t d o es n o t reci te an y al l eg at i o n o f p h y si cal i n

jury , an dp et i t i o n er d i dn o trel eas e th e co l l eg e fro m an y cl ai m o f p h y s i cal i n

jury . Th e p art i es ag reedth at“ a Fo rm W -2 wi l l b e i s su ed ” fo r t h e s et t l em en tp aym en t“ l es s l eg al wi th h o l d in g s .” Th e co l l eg e i s su edp et i t io n er a Fo rm W -2 , W ag e an dTax St at em en t , rep o rt i n g th e s et tl em en t am o u n t as wag es fo r 2 01 3 . He t i m el y fi l ed Fo rm

1 0 4 0 , U.S. In d i v i du al In co m e Tax Retu rn , fo r 2 0 1 3 , rep ort i ng th e p ro ceed s as wag es o n l i ne 7 . OnM arch 1 4 , 2 0 1 6 , th e IRS s en th i m a t im el y n o t i ce o f d efi ci en cy

th atad
ju s t edh i s So ci al Secu ri ty i nco m e, redu ced a cl ai m edcas u al ty l o s s d edu ct io n , an d d i s al lo weda cl ai m ed d educt i o n fo r g am b li n g l o s ses . Pet i t i o ner t i m el y

p et it i o n edth i s Co u rt . Befo re t ri al h e co n ced edal l o f t h e ad ju s t m en t s i n th e n o t ice o f d efi ci en cy . By way o f o ffs eth e co n t en dedth ath e h ad erred i n treat i n g th e s et t l em en t p aym en tas t ax ab l e i n co m e an dth ati twas ex cl u d
ab l e fro m g ro s s i n co m e i n i t s en t i ret y u nd er s ect i on 1 0 4 (a)(2 ). OPINION Th e IRS’ d et erm i n at i o ns i n a n o t i ce o f d efi ci en cy are g en eral l y

p res u m ed
co rrect th o u gh th e t ax p ay er can reb u t th i s p res u m p t io n . Ru le 1 42 (a); W el ch v . Hel v eri n g , 2 9 0 U.S. 1 1 1 , 1 15 (1 9 33 ). In cert ai n ci rcu m s t an ces th e b urd en o f p ro o f
o n fact u al i s s u es m ay

s h i ftt o res p o n d en t . See s ec. 7 49 1 (a); Ru l e 1 42 (a)(1 ). Pet i
-- 6
-

[* 6 ] t i on er d o es n otco nt en d , an dth e reco rdd o es n o td em o n s trat e, t h atthi s p ro v is i o n ap p l ies h ere. Sect io n 6 1 (a) d efi n es “ g ro s s i n co m e” as “ al l i n co m e fro m wh at ev er s o u rce d eri v ed .” Th i s d efi n i t i o n h as b ro ads co p e, an dex cl u si o n s fro m g ro s s i n co m e m

u s t b e n arro wl y

co n s tru ed . Co m

m i s s i o n er v . Sch l ei er, 5 1 5 U.S. 3 2 3 , 3 2 8 (1 9 9 5 ); Co m m i s s i o n er v . Gl en s haw Gl as s Co ., 3 4 8 U.S. 4 26 , 4 2 9 (1 9 55 ); Hel veri n g v . Cl i ffo rd , 3 09 U.S. 3 3 1 , 3 3 4 (1 9 4 0 ). Pro ceed s fro m l i t ig at io n s et tl em en t s co n s t i
tu t e g ro s s i n co m e u n l es s th e t ax p ay er p ro v es th atthe p ro ceed s fal l wi th i n a s p eci fi c s t atu t o ry

ex cl u si o n . Sch lei er, 5 1 5 U.S. at3 2 8 -3 3 7 ; Sav e v . Co m m i s s i o n er, T.C. M em o. 2 0 0 9 -2 0 9 , 9 8 T.C.M . (CCH) 2 1 8. Th e ex cl u s i o n fro m

g ro s s i n co m e up o n wh i ch p et i t i o ner rel i es ap p ears i n
s ect i on 1 0 4 (a)(2 ). Itp ro v i d es th atg ro ss i n co m e d o es n o ti n cl ud e “ th e am ou n to f
an y d am ag es (o th er t han p u n i t i v e d am ag es ) recei v ed(wh et h er b y s u ito r ag reem en t* * * ) o n acco u n to f p ers o n al p h y s i cal i n juri es o r p h y s i cal s i ckn es s . ” Co n g res s i nt en d edthi s ex cl us i on t o co v er al l n o np un i t i v e d am ag es th atfl ow fro m a p h y s i cal i n

jury o r p h y s i cal s i ckn es s . See H.R. Co n f. Rep t . No . 1 0 4 -7 3 7 , at3 0 1 (1 9 9 6), 1 9 96 -3 C.B. 7 4 1 , 1 0 4 1. Fo r t h i s p u rp o s e, “ em o t i o n al d i s tres s s h al l n o tb e treat ed as a p h y si cal i n

jury o r p h y s i cal s i ckn es s .” Sec. 1 0 4 (a) (p en u l t i m at e s en t en ce).- 7
-

[* 7 ] Wh en d am ag es are recei v edu n d er a s et t l em en t ag reem en t, th e n atu re o f t h e cl ai m th atwas th e act ual b as i s fo r t h e s et t lem en td et erm in es wh et h er t h e d am ag es
are ex cl u d ab l e u n d er s ect i o n 1 0 4 (a)(2 ). Un i tedSt at es v . Bu rk e, 5 0 4 U.S. 2 2 9 , 2 3 7 (1 9 9 2). “ Th e n atu re o f th e cl ai m ” i s ty p i cal l y d et erm i nedb y

referen ce t o th e t erm s
o f t h e ag reem en t . See Kn uck l es v . Co m m i s s io n er, 3 4 9 F.2 d6 1 0 , 6 1 3 (1 0 th Ci r. 1 9 6 5 ), aff’ g T.C. M em o . 1 9 6 4 -3 3 , 2 3 T.C.M . (CCH) 1 8 2
. If t h e s et t l em en tag reem en td o es n o tex p l i ci t l y

s t at e wh i ch cl ai m s t he p aym en twas m ad e t o s et t l e, “ th e i n t en to f t h e p ay o r * * * i s cri t i cal
. ” Lo n g ori a v . Co m m i s si on er, T.C. M em o . 2 0 0 9 -1 6 2 , 9 8 T.C.M . (CCH) 1 1 , 1 5 ; s ee Dev i n e v . Co m m i s s i on er, T.C. M em o . 2 0 1 7 -1 1 1 , at* 11 ; Geo rg e v . Co m m i s s i o n er, T.C. M em o . 2 0 1 6 -1 5 6 , at* 7
. Th e i n ten to f t he p ay o r m ay b e d et erm i n edb y t ak i n g i n t o co n si d erat io n al l
o f t h e fact s an dci rcu m s t an ces , i n cl u d i n g the am o u n tp ai d , th e ci rcu m s t an ces l ead
i n g t o th e s et t l em en t , an d th e al l eg at i o n s i n th e i n juredp arty ’ s co m

p l ai n t . Green v . Co m m i s s i o n er, 5 0 7 F.3 d8 5 7 , 8 6 8 (5 th Ci r. 2 0 0 7 ), aff’ g T.C. M em o . 2 0 0 5 -2 5 0 , 9 0 T.C.M . (CCH) 4 3 6 ; Ben t v . Co m m i s s i o n er, 8 7 T.C. 2 36 , 2 4 5 (1 9 8 6 ), aff’ d , 8 3 5 F.2 d6 7 (3 dCi r. 1 9 8 7). “ [T] h e n atu re o f u n d erl y i n g cl ai m s can n o t b e d et erm i n ed fro m a g en eral rel eas e [o f cl ai m s ] th ati s b ro adan di n cl u s i ve.” Ah m edv . Co m m i s s i o n er, T.C. M em o . 2 0 1 1 -2 9 5 , 1 02 T.C.M
. (CCH) 6 07 , 6 08 (ci t in g Co n n o l l y v .- 8
-

[* 8 ] Co m

m i s s i on er, T.C. M em o . 2 0 0 7 -9 8 , 9 3 T.C.M . (CCH) 1 1 3 8 ), aff’ d , 4 9 8 F. Ap p ’ x 9 1 9 (1 1 th Ci r. 2 0 1 2 )). Pet i t i o ner’ s cau se o f act i o n was b as edex cl u si v el y o n th e New Yo rkHu m an Ri g ht s Law an dco m

p arab l e p ro v i s i o n s o f Fed eral l aw t h atp ro h i bi td i s cri m i n at i o n
o n th e b as i s o f d i s ab i l it y . No wh ere i n h i s co m p lai n to r i n h i s 1 2-p ag e reb u t t al t o th e co l l eg e’ s res p o n se t o th at co m p l ai n t d i dh e al l eg e an y

p h y s i cal i n

j u ry o r p h y s i cal s ickn es s fo r wh i ch th e co l l eg e s h o u l db e l i ab l e. Th e s et t l em en t ag reem en t d o es no tm en t i o n an y

p h y s i cal i n

jury o r p h y s i cal s i ckn es s th ath e s u ffered wh i l e o n th e jo b, m

u ch les s al l o cat e an y

p o rt i o n o f t h e s et t l em en tt o cl ai m s th erefo r. By ex ecu t i n g th e s et t l em en t p et i t i o n er rel eas edth e co ll eg e fro m an y cl ai m s ari s in g u n d er an y

Fed eral o r St at e l aw “ p ro h i b i ti n g em p l o ym en td i s cri m in at i o n b as edup o n ag e, race, co l o r, s ex , rel i g i o n , h an d icap o r d i s ab i l i ty ” as wel l as fro m
an y cl ai m fo r co m p en s at i o n ari s i n g fro m

“ th e t erm an dco n d i t i o ns o f * * * [h i s ]
em pl o y m en t ” o r t h e t erm i n at io n o f h i s em p lo ym en t . Th ere i s n o s u g ges t i o n i n th i s p ro v is i o n th at p et i t i o ner h ad m ad e, o r was rel eas i n g th e d efen d an ts fro m , an y cl ai m s fo r d am ag es o n acco u n to f p h y s i cal i n jury o r p h y s i cal s i ckn es s . See M o l i n a
v . Co m m i s s i o n er, T.C. M em o . 2 0 1 3 -2 2 6 , 1 0 6 T.C.M . (CCH) 3 7 1, 3 7 3 -3 7 4. Th e p art i es ex p l i ci tl y

reci t edth ei r ag reem en tth at“ a Fo rm W -2 wi l l b e i s s u ed ,” refl ect i n g th ei r u nd ers tan d i n g t h atth e s et t l em en tp ro ceed s rep l aced l o stwag es .- 9
-

[* 9 ] Attri al p et it i on er ack n o wl ed gedth at h e h adt o d em o n st rat e s o m e p hy s i cal i n juri es ap artfro m

th o s e s u ffered i n th e 2 0 1 1 car cras h i n o rd er t o ren d er th e s et t l em en tp aym en t“ d am ag es recei v ed* * * o n acco u n to f p ers o nal p h y s i cal i n juri es
o r p h y s i cal s i ckn es s.” See s ec. 1 0 4 (a)(2 ). He t es t i fi edv ag u el y th atth e co ll eg e’ s al l eg edd i s cri m i nat i o n h adex acerb at edh i s earl i er i n juri es , e.g . , b y

cau s i n g h i m h ead ach es . Bu th e p o in tedt o n o m ed i cal ev i d en ce t o s up p o rtth is
. Th e o nl y m ed i
cal b i l ls i n th e reco rdrel at e t o h i s Feb ru ary 2 0 1 3 an k l e s u rg ery

an d a fo l lo wup
v i s i ts i x m o n ths aft er h i s em p l o ym en twas t erm i n at edb y th e co l l eg e. In s u m , th ere i s n o cred i bl e ev i d en ce t h atp et i t i o n er s u ffered an y o n -t h e-jo b p h y s i cal i n

jury fo r wh i ch th e co l l eg e m i g h tb e t h o u g ht t o h av e co m pen s at edh i m . Hi s co m p l ai n tan dth e ag reem en tth ats et t l ed h is co m p l ai n tu n i fo rm l y

refer t o cl ai m s o f d i s ab i l i ty -b as edd i scri m i n at i o n i n al l eg edv i o l at io n o f Fed eral an dSt at e ci v i l ri g h t s l aws . W e acco rd i n g l y co n cl ud e t h atp et it i o n er h as n o tb o rn e h i s b u rd en o f p ro v i n g th atan y

p ort io n o f t he s et t l em en tp ro ceed s was ex cl u d ab l e fro m g ro s s i n co m e u n d er s ect i o n 1 0 4 (a)(2 ). To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t eredfo r
res p o nd en t .