In Uncategorized on 02/08/2021 at 16:30

No, not us solos (“single shingles”). This is the disease from which Cindy Stassi suffered, as more particularly bounded and described by Judge Kerrigan in Timothy Stassi and Cindy Stassi, 2021 T. C. Sum. Op. 5, filed 2/8/21.

While employed, Cindy suffered from said disease. She was placed on a 30-day improvement plan thereafter, then on leave without pay, and finally she quit. A week after starting her planned improvement, she “…sent to a member of [employer’s] Board of Directors a letter complaining about the work environment at [employer]. Her letter described specific problems associated with her work…. The letter did not mention physical injury or sickness.” 2021 T. C. Sum. Op. 5, at pp. 2-3. (Name omitted).

Not good, right? It doesn’t get better. Cindy found a lawyer.

Said lawyer fired off a letter to Cindy’s employer “…demanding damages for wage and hour violations, constructive termination, and ‘Emotional Distress and Punitives’.” 2021 T. C. Sum. Op. 5, at p. 5.

You know what comes next.

“The settlement recitals described petitioner wife’s claims as follows: ‘[Petitioner wife] claims she is owed wages and that she was constructively discharged and retaliated against for making certain complaints, * * * [and that] she has suffered emotional distress with physical manifestations of same.’ The words ‘physical manifestations’, which had not been part of petitioner wife’s initial complaint, were inserted into the settlement agreement during negotiations.

“The parties agreed that $10,350 of the settlement proceeds would be designated ‘consideration for lost wages’, and that [employer] would issue to petitioner wife a Form W-2, Wage and Tax Statement, with respect to this amount. The parties further agreed that the remaining $69,650 of the settlement proceeds would be designated ‘consideration for physical manifestations of [petitioner wife’s] emotional distress claims”, and that [employer] would issue to petitioner wife a Form 1099-MISC, Miscellaneous Income, with respect to this amount.” 2021 T. C. Sum. Op. 5, at p. 3.

Employer gave Cindy two checks, one for the wages and one for the manifesto.

When tax time came, Tim and Cindy reported as follows. ” They reported the $10,350 portion of the settlement proceeds as taxable wages and reported $1 of the remaining $69,650 as ‘Other Income’. Petitioners attached to their… tax return a statement written by their tax return preparer explaining the decision to report only $1 of the $69,650 portion of the settlement proceeds, and a letter from petitioner wife’s attorney relating to the settlement agreement.” 2021 T. C. Sum. Op. 5, at p. 4.

By now, my ultra-hip readers have turned off their smartphones and said “Why is he wasting my time with this? Emotional distress is not a physical injury, no matter what the manifesto says! See H.R. Conf. Rept. No. 104-737, at 301 n. 56 (1996), 1996-3 C.B. 741, 1041. The whole boat is taxable.”

Well, Judge Kerrigan came to the same conclusion (surprise, surprise).

And the reason I’m blogging this is so that I have materials for a CLE I’m planning to give to a trial lawyers’ group about how not to do it.




Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: