Second, the payment Miles received was not on account of
personal injuries or sickness. See Schleier, 515 U.S. at 336,
115 S.Ct. 2159. The payment was calculated based upon Miles'
years of service and salary, and was in no way linked to any
personal injuries he may have suffered. See id. at 330, 115
S.Ct. 2159. Again accepting Dr. Peter's testimony for purposes of
this motion, it cannot be said that Miles received the payment on
account of personal injuries he did not know he had. The payment
was exclusively linked to Miles' employment with IBM. Plaintiffs
have adduced no facts even suggesting that the payment Miles
received on July 31, 1992, was attributable to a personal injury
he actually suffered. See id.; Abrahamsen, 44 Fed.Cl. at 270.
Defendant has met its initial burden of pointing out an absence
of evidence to support plaintiffs' claim that Miles' payment
falls under the section 104(a)(2) exception. Plaintiffs have
failed to meet their burden of setting forth some evidence that
the lump sum payment made to Miles was excludable from taxable
income pursuant to section 104(a)(2). Based upon the undisputed
facts, defendant has established its entitlement to judgment
dismissing Miles claim for an income tax refund.
C. Social Security Employment Tax
Wages, or "all remuneration for employment," are subject to
employment taxes to fund social security programs. 26 U.S.C.A. §
3121(a) (1999 Supp.). Employment is "any service, of whatever
nature, performed" by an employee for an employer. § 3121(b).
Service means "not only work actually done but the entire
employer-employee relationship for which compensation is paid to
the employee by the employer." Social Security Bd. v. Nierotko,
327 U.S. 358, 365-66, 66 S.Ct. 637, 90 L.Ed. 718 (1946). Given
the purpose of the social security system, the statute must be
interpreted to provide broad coverage. Id. at 365, 66 S.Ct.
Plaintiffs contend that the payment made to Miles is not
subject to the employment tax because it was not made in exchange
for services. However, the payments were made by IBM, as
employer, to Miles its employee. The payment amount was
calculated based upon Miles' employment with IBM, using a formula
taking into account Miles' years of service and salary. The
payment must be considered as compensation within the employment
relationship, although not for work actually done. See
Nierotko, 327 U.S. at 365-66, 66 S.Ct. 637; Abrahamsen, 44
Fed.Cl. at 272. Accordingly, the payment Miles received from IBM
is subject to the social security employment tax and he is not
entitled to a refund. Defendant is entitled to summary judgment
on this claim. See Nierotko, 327 U.S. at 365-66, 66 S.Ct. 637;
Abrahamsen, 44 Fed.Cl. at 272.
The testimony of Dr. Peters and Reibstein is accepted for the
purposes of determining the summary judgment motions, but may be
revisited if a trial in this matter occurs. Defendant's other
evidentiary motions are denied as moot.
The payment made to Miles by IBM does not fall within the
exception for settlement of personal injury claims set forth by
section 104(a)(2). Therefore the payment is subject to income
tax. Further, the payment falls within the broad coverage of the
term wages for the purposes of social security employment taxes.
There being no genuine issue of material facts, defendant is
entitled to judgment as a matter of law. Based upon the
stipulation of plaintiffs to withdraw all claims should summary
judgment be decided adversely to Miles, the complaint will be
dismissed in its entirety. Accordingly, it is
1. Plaintiffs' motion for summary judgment is DENIED;
2. Defendant's motions to preclude the testimony of Dr. Peter
and Reibstein are
DENIED without prejudice to renew in the event of trial and
defendant's remaining evidentiary motions are DENIED as moot; and
3. Defendant's motion for summary judgment is GRANTED; and the
complaint is dismissed in its entirety.
The Clerk of the Court is directed to enter judgment
IT IS SO ORDERED.