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61(a)(1); sec. 1.61-2(a)(1), Income Tax Regs. With an exception
not here relevant, gross income does not include “the amount of
any damages received (whether by suit or agreement * * *) on
account of personal injuries or sickness”. Sec. 104(a)(2). “The
term ‘damages received (whether by suit or agreement)’ means an
amount received * * * through prosecution of a legal suit or
action based upon tort or tort type rights, or through a
settlement agreement entered into in lieu of such prosecution.”
Sec. 1.104-1(c), Income Tax Regs. (emphasis added). Only
payments received to settle bona fide disputes may be excluded
under section 104(a)(2). See, e.g., Taggi v. United States, 35
F.3d 93, 96 (2d Cir. 1994).
Respondent argues that the payment is an item of taxable
compensation for services, viz, severance pay. Petitioner does
not disagree that, if the payment is compensation for services,
it is taxable compensation for services. Rather, petitioner
argues that the payment is not compensation for services but is
damages received in settlement of various claims. Petitioner
requests that this Court apportion the payment between damages
received on account of his claim of age discrimination (which
petitioner concedes is an item of gross income; see Commissioner
v. Schleier, 515 U.S. 323 (1995) (recovery under the Age
Discrimination in Employment Act of 1967 is not excludable under
section 104(a)(2)) and damages received on account of his other
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