Glynn v. Comm'r of Internal Revenue
| Decision Date | 21 January 1981 |
| Docket Number | Docket No. 4718-77. |
| Citation | 76 T.C. 116 |
| Parties | WILLIAM A. GLYNN and FLORENCE E. GLYNN, PETITIONERS v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Petitioner, the Superintendent of Schools of Foxborough, Mass., was requested to resign by the school committee since the committee did not agree with the way petitioner was managing the school system. Petitioner threatened legal action based upon a series of charges leveled by him against the committee, none of which alleged that petitioner suffered personal injuries or sickness, but did allege damage to petitioner's professional reputation. The dispute was settled by payment of a lump-sum amount to petitioner, described in the settlement agreement as being “in lieu of doctoral advantages.” Held the lump-sum payment is not excludable from gross income under sec. 104(a)(2), I.R.C. 1954, since it did not represent damages received (whether by suit or agreement) on account of personal injuries or sickness; nor was it in payment for damages to petitioner's personal vis-a-vis professional reputation. Held, further an amount received by petitioner as compensation and held by petitioner in a segregated account for the possible future use of St. Michael's School is taxable income under sec. 61(a)(1) in the year received. William A. Glynn, pro se.
Thomas P. Dougherty, Jr. for the respondent.
Some of the facts have been stipulated. The stipulation of facts and attached exhibits are incorporated herein by reference.
At the time the petition was filed, the petitioners resided in Foxborough, Mass.
From 1963 through January 30, 1973, petitioner William Glynn (the petitioner) held the position of Superintendent of Schools for the Town of Foxborough, Mass.
In October 1969, the Foxborough School committee (the committee) requested petitioner's resignation as superintendent since the committee did not agree with the way petitioner was managing the school system. Petitioner believed that a factor motivating this request was his high salary. He felt he had come to be perceived by many as a symbol of the high cost of education.
Petitioner indicated to the committee that he would submit his resignation if he were paid for unused vacation time, professional improvement leave, and sick leave. The committee, however, refused to commit itself to paying petitioner for his unused sick leave and petitioner consequently did not submit his resignation.
Prior to January 1971, petitioner privately informed the committee that he was considering a lawsuit against it and some of its individual members. In January of that year, petitioner made his threats of suit public for the first time.
In September 1972, in a closed-session meeting, the committee repeated its request for petitioner's resignation. Petitioner responded by again threatening suit against the committee and its individual members.
In connection with his threats of legal action, petitioner submitted a document to the committee entitled “Unethical Conduct Charges.” The charges accused the committee of, among other things, denying petitioner a vacation time allowance previously granted; denying petitioner sabbatical leave; denying petitioner accumulated benefits; and generally interfering in petitioner's performance of duties as superintendent (specific instances were listed). In addition, the list of charges included the following allegations:
17. That certain members of the Foxborough School Committee did violate ethical conduct by the illegal disclosure of information concerning an executive session meeting.
18. That certain members of the Foxborough School Committee did violate ethical conduct by damaging the professional reputation of the superintendent by this disclosure.
In a letter dated November 27, 1972, to petitioner's lawyer, Jeffrey Freedman, the committee recited the various charges which provided the basis for the committee's proposed dismissal of petitioner. This letter, in specifically referring to petitioner's continued threats of legal action, alleged that such threats tended to destroy the committee's harmonious and cooperative atmosphere and thus constituted conduct unbecoming a superintendent. The committee also cited specific instances of alleged mismanagement and incompetency, including petitioner's deficiencies in administering and evaluating the Iowa Tests and his supervision of the activities of the business manager, and petitioner's failure to inform the committee as to the existence of a drug problem in the school system. The letter stated that “Each of the charges set forth herein is a separate and adequate cause for said dismissal.”
Discussions between petitioner's lawyer and the committee's chairman, Vincent Igo, concerning a settlement of the dispute were conducted between September and December of 1972. In December of that year, Freedman informed petitioner that there appeared to be a basis for settlement as the committee had agreed to pay petitioner for his unused sick leave (in addition to unused vacation time and professional improvement leave). Although petitioner was willing to resign on these terms, they were never ratified by the committee.
In January 1973, after the aborted settlement effort, the committee instituted formal removal hearings based on the charges contained in the November 27 letter to Freedman. After several committee meetings, petitioner and the committee resolved their dispute and signed a settlement agreement dated January 27, 1973.
Petitioner was the principal drafter of this agreement. Pursuant to the settlement, petitioner agreed to drop all charges against committee members and to resign as superintendent, effective January 30, 1973. In addition, petitioner was to remain employed by the school system as a teacher. Finally, the agreement stated that “The committee grants Mr. Glynn the sum of $25,000 as a lump sum payment in lieu of doctoral advantages.”
The forsaken “doctoral advantages” essentially referred to the Ph.D. degree which petitioner failed to obtain. During his tenure as superintendent of schools at Foxborough, petitioner was inhibited from pursuing his doctorate because of a heavy work schedule and also, in petitioner's view, because of the committee's alleged denial of sabbatical leave.
The committee members believed that the only basis for petitioner's threatened legal actions were contained in petitioner's unethical conduct charges. At no time did petitioner ever expressly threaten to sue the committee for any injury to his personal reputation or his physical or mental health. During the period of petitioner's dispute with the committee, no personal slurs were lodged against petitioner, either by the committee en masse or by any of its individual members.
During 1973, the St. Michael's School of Newport, R.I. (St. Michael's), paid $6,400 in wages to petitioner for his services as the school's executive director. Petitioner wanted to donate these wages to St. Michael's in order that the school would be able to construct housing facilities for its executive director or headmaster. During 1973, petitioner placed these wages in a special bank account over which he had exclusive dominion and control. As of the time of the trial of this case, St. Michael's had not been given the use of any of these funds; the $6,400 was at that time in a special account at Merrill, Lynch, Pierce, Fenner & Smith, Inc., and petitioner had exclusive dominion and control over the account.
OPINIONThe first issue for decision involves the question of whether the $25,000 payment which petitioner received pursuant to the settlement agreement with the Foxborough School Committee is includable in gross income. Petitioners argue that this “payment may reasonably be construed as compensation for...
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