COMMISSIONER OF INTERNAL REVENUE v. PALONE
The Ninth Circuit Court of Appeals today released an opinion in COMMISSIONER OF INTERNAL REVENUE v. PALONE, No. 04-72672, a tax appeal. The panel consisted of Jerome Farris and Sidney R. Thomas, Circuit Judges, and George Schiavelli, District Judge.
THOMAS, Circuit Judge:
This appeal presents the question of whether payments received after the effective date of amendments to 26 U.S.C. ยง 104(a)(2) based on a defamation settlement agreement executed prior to the effective date can be excluded from gross income. We conclude that the amendments apply to payments received after the effective date of the amendment, and we affirm the judgment of the Tax Court. I Gavin Polone worked as a talent agent at United Talent Agency (”UTA”) from 1989 until April 21, 1996, when he was fired. After terminating Polone, UTA spoke with various entertainment industry trade publications, and made statements about Polone’s termination. Specifically, UTA alleged that Polone was terminated for “inappropriate behavior.” Polone hired counsel, and sent UTA a demand letter on April 22, 1996. The letter alleged that UTA had made defamatory statements about Polone, and requested that UTA “cease and desist from making further defamatory statements.” On April 24, 1996, Polone filed a complaint in the Los Angeles County Superior Court alleging, among other things,wrongful termination and defamation. Polone and UTA settled both claims on May 3, 1996. Polone received $2 million as settlement of the wrongful termination claim, which is not at issue in this case. As part of the settlement of the defamation claim, UTA issued a press . . .
The panel has decided to amend the opinion filed June 5, 2006. The opinion is withdrawn and a substituted opinion is filed concurrently with this order. . . .