                          T.C. Memo. 1996-311



                        UNITED STATES TAX COURT



                    GLORIA ANN HOUSE, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 11868-94.                      Filed July 10, 1996.



        Gloria Ann House, pro se.

        Trevor T. Wetherington, for respondent.



                          MEMORANDUM OPINION


        CARLUZZO, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1


        1
      All section references are to the Internal Revenue Code in
effect for the year in issue. All Rule references are to the Tax
Court Rules of Practice and Procedure.
                                 - 2 -

     Respondent determined a deficiency in petitioner's 1991

Federal income tax in the amount of $840, and an accuracy-related

penalty in the amount of $168.    Following a concession,2 the

issue for decision is whether petitioner must include in her 1991

income a cash award received from Wayne State University during

that year.

Background

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the exhibits attached thereto are

incorporated herein by this reference.       At the time the petition

was filed, petitioner resided in Detroit, Michigan.

     During 1991, petitioner was employed as a professor by Wayne

State University (the university).       Her wages from such

employment for that year were $39,441.98.       She was the recipient

of the Wayne State University 1991 President's Award for

Excellence in Teaching.   Along with the professional distinction

and honor resulting from the award, petitioner received $3,000 in

cash from the university in 1991 in addition to her wages.       The

proceeds of the award were paid directly to petitioner and not to

an entity designated by her.

     In connection with the award, petitioner received a Form

1099 from the university reflecting the $3,000 payment, from



     2
      Respondent has conceded the sec. 6662(a) accuracy-related
penalty imposed for 1991.
                                 - 3 -

which there were no withholdings.    On line 22 of her 1991 Federal

income tax return petitioner made the following notation:

"Scholarly Prize-nontaxable" and "see attached Form 1099".

Although petitioner disclosed the receipt of the $3,000 award on

her 1991 return, she did not include any portion of it in her

income for that year.

     In the notice of deficiency upon which this case is based,

respondent determined that petitioner must include the entire

$3,000 award in her 1991 income and computed the deficiency here

in dispute accordingly.

Discussion

     Respondent's determination, having been made in a notice of

deficiency, is presumed correct and petitioner bears the burden

of proving such determination erroneous.     Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).

     Section 61 provides in general that gross income means all

income from whatever source derived.     Sec. 61(a).   Specifically,

section 74(a) provides that gross income includes amounts

received as prizes and awards.    An exception to the provisions of

section 74(a) is provided in section 74(b), which provides:

          Gross income does not include amounts received as
     prizes and awards made primarily in recognition of
     religious, charitable, scientific, educational,
     artistic, literary, or civic achievement, but only if--
          (1) the recipient was selected without any
          action on his part to enter the contest or
          proceedings;
          (2) the recipient is not required to render
          substantial future services as a condition to
          receiving the prize or award; and
                                   - 4 -

               (3) the prize or award is transferred by the
               payor to a governmental unit or organization
               described in paragraph (1) or (2) of section
               170(c) pursuant to a designation made by the
               recipient.

       All three of the above conditions must be met in order for a

taxpayer to exclude from income an amount received as an award

that would otherwise be includable in income pursuant to section

74(a).3      Without discussing the conditions set forth in

paragraphs (1) and (2) of section 74(b), it is clear that

petitioner failed to satisfy the condition set forth in paragraph

(3).       The university paid the $3,000 directly to petitioner, a

fact that petitioner does not dispute.

       Even though petitioner admits that she failed to satisfy the

condition set forth in section 74(b)(3), she contends that

because the university failed to withhold any taxes from the

award payment, the amount received as an award does not

constitute income to her and therefore need not be included in

the income she reported on her 1991 return.       The university's

failure to withhold Federal income taxes from the award payment,

however, has no effect on the operation of sections 61(a) and

74(a) that, as discussed above, require petitioner to include the

proceeds of the award in her income.       See Church v. Commissioner,

810 F.2d 19 (2d Cir. 1987); Fawcett v. Commissioner, T.C. Memo.

1975-271.

       3
      The exception provided in sec. 74(c) has no application in
this case.
                              - 5 -

     We have considered petitioner's other arguments in support

of her position and find them to be without merit.    Accordingly,

respondent's determination is sustained.

     To reflect the concession of the parties in this matter,


                                      Decision will be entered

                              for respondent with respect to

                              the deficiency and for petitioner

                              with respect to the section 6662(a)

                              penalty.
