- 11 -
excludable under section 104(a)(2). United States v. Burke,
supra at 237. The determination of the nature of the claim is
factual. Robinson v. Commissioner, 102 T.C. 116, 126 (1994),
affd. in part, revd. in part, and remanded on another issue 70
F.3d 34 (5th Cir. 1995); Seay v. Commissioner, 58 T.C. 32, 37
(1972). Where there is a settlement agreement, that determina-
tion is usually made by reference to it. See Knuckles v. Commis-
sioner, 349 F.2d 610, 613 (10th Cir. 1965), affg. T.C. Memo.
1964-33; Robinson v. Commissioner, supra. If the settlement
agreement lacks express language stating what the amount paid
pursuant to that agreement was to settle, the intent of the payor
is critical to that determination. Knuckles v. Commissioner,
supra; see also Agar v. Commissioner, 290 F.2d 283, 284 (2d Cir.
1961), affg. per curiam T.C. Memo. 1960-21. Although the belief
of the payee is relevant to that inquiry, the character of the
settlement payment hinges ultimately on the dominant reason of
the payor in making the payment. Agar v. Commissioner, supra;
Fono v. Commissioner, 79 T.C. 680, 696 (1982), affd. without
published opinion 749 F.2d 37 (9th Cir. 1984). Whether the
settlement payment is excludable from gross income under section
104(a)(2) depends on the nature and character of the claim
asserted, and not upon the validity of that claim. See Bent v.
Commissioner, 87 T.C. 236, 244 (1986), affd. 835 F.2d 67 (3d Cir.
1987); Glynn v. Commissioner, 76 T.C. 116, 119 (1981), affd.
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