Parkinson v. Commissioner

Ronald Parkinson (plaintiff) worked at Anne Arundel Medical Center (the medical center) for 28 years. He worked long, stressful hours and in 1998 suffered a heart attack. After returning to work, Parkinson reduced his workweek from roughly 70 to 40 hours. On February 4, 2000, Parkinson suffered another heart attack. Parkinson filed suit against the medical center and two of its employees, asserting claims of intentional infliction of emotional distress and invasion of privacy. He claimed that after he reduced his hours, the employees repeatedly pressured him to work overtime, and that during one such encounter, he suffered his second heart attack. Parkinson asserted that he suffered severe emotional distress manifested by physical injuries, including his second heart attack, cardiovascular damage, and complete disability. Parkinson’s invasion-of-privacy claim used similar language but was directed only against the employees. The day after the trial began, the parties reached a settlement agreement. The medical center agreed to pay $350,000 in exchange for settling all of Parkinson’s claims against it. The employees bore no responsibility for payment under the agreement. In 2005, Parkinson received $34,000 in settlement proceeds. He did not report any portion on his federal income tax return. The commissioner of internal revenue (defendant) issued a deficiency notice, asserting that the payment was taxable. Parkinson petitioned the tax court for review.