Rachel lives in a downtown apartment in Gotham City. She has 3 years remaining on her apartment lease when her landlord, Blaylock Company, approaches her about moving out. Blaylock wants to demolish the apartment building and build an office tower in its place.

Rachel hires a lawyer who negotiates a lease termination settlement with Blaylock over the leasehold rights. After intense negotiations, Blaylock agrees to pay $100,000 in cash and the $25,000 in legal fees related to the negotiation and to provide Rachel with a similar apartment rent-free for 3 years. Rachel requests that Blaylock issue no checks directly to her. Instead, Blaylock is to pay her lawyer the $25,000 billed and issue a check for $100,000 to her brother, who lives in Mexico.

Rachel believes that none of these transactions will have any effect on her taxable income because the checks are not issued to her. Furthermore, because she did not own the apartment building, she did not realize a gain from the sale of the property.

Does the settlement result in any taxable income or deductions for Rachel?