Two physical injury exclusion-excuses cases are on tap at 400 Second Street, NW, today. Leading off, Thomas J. Dern and Peggy M. Dern, T. C. Memo. 2022-90, filed 8/30/22. No question Tom was sick: gastrointestinal bleeding and a heart attack caused hospitalization more than once. Tom was a traveling salesman who couldn’t travel, and his employer fired him. Tom sued for disability discrimination, and got a big settlement.

You can guess the rest. The settlement documents never mentioned physical ailment or injury. Tom’s ailments weren’t caused by his work. While his six-figure legal fees and court costs were deductible per Section 62(a)(20), the rest wasn’t. Tom’s trusty PI attorney would have benefitted from the settlement-drafting course given by the New York State Academy of Trial Lawyers a couple months back (hi, Judge Holmes). Best and cheapest CLE around.

Judge Vasquez, often pro-petitioner, can’t help Tom.

“While the settlement agreement provides for a payment ‘to compensaten [Mr. Dern] for alleged personal injuries,’ it does not specify whether those injuries were physical. Instead, it provides for a broad general release by Mr. Dern of  ‘all claims known or unknown.’ This general release does not specifically allocate any part of the settlement agreement to personal physical injuries or physical sickness. The nature of Mr. Dern’s claim cannot be determined from such a release.” T. C. Memo. 2022-90, at pp. 6-7.

Of course, general releases are broadly drawn; defendants pay for peace, and want to make sure they get it. But viewing the complaint to find what the parties think they settled doesn’t help. The complaint specifies violations of CA employment and human rights laws. Now I don’t fault Tom’s trusty PI attorney for the State law discrimination approach. Arguing and trying physical injury when same not caused by employer or worksite conditions is likely to get tossed on motion in State court (and probably Federal Court too). The issue was discrimination based on physical disability, not what caused the disability.

Tough case.

George Anton Remisovsky and Ellen Jones-Remisovsky, T. C. Memo. 2022-89, filed 8/30/22, raises disability as an excuse for Section 6651 late-filing and late-paying add-ons. This one comes up on a CDP concerning the add-ons, as the taxes are self-assesseds.

GA claims depression and other ills as excuses, and rejects the IA Appeals offers because it includes the add-ons. Judge Albert G (“Scholar Al”) Lauber says GA made no counter, so SOs need not negotiate with themselves.

As for disability, GA doesn’t establish that he was incapacitated when the returns were due.

“Assuming arguendo that petitioner husband was too ill to file, petitioners presented no evidence that petitioner wife (who did not testify at trial) was unable to discharge this obligation. Petitioner wife was employed…as a retail manager and had an independent filing obligation. Each taxpayer has a nondelegable duty to file. The incapacity of one’s spouse does not constitute a per se excuse for failure to file a return. Indeed, petitioners at the relevant times appear to have had an established relationship with an accountant, who prepared their [previous year’s] return and hand-delivered it to the IRS…. Petitioners did not explain why one of them could not have telephoned the accountant to set the wheels in motion for the preparation and filing of a [year at issue] return.” T. C. Memo. 2022-89, at p. 6. (Citations omitted).

You may be hurt, but IRS committed no foul.