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punitive damages that had been awarded under the final judgment
in the whistleblower lawsuit. There is no indication that a
total abatement was intended or effected. In any event,
petitioner has presented no persuasive reason for concluding that
any of the damages resolved by paragraph 6 fall within an exempt
category.
Again, petitioner has failed to establish the second prong
of Schleier because he is unable to establish that any part of
the second annuity was allocable to personal injury or sickness,
and the record lacks any evidentiary basis for concluding that
any portion of the second annuity was allocable to personal
injury or sickness. See Lindsey v. Commissioner, supra.
Therefore, after examining the facts and circumstances
surrounding the claim and the settlement agreement, we conclude
that the payments received under paragraph 6 and the second
annuity contract are not excludable under section 104(a)(2) and
are to be included in petitioner’s gross income when received.
Expenses for Green Capital and TS Capital
The parties stipulated that for tax years 1995 through 1998
petitioner is entitled to additional deductions in agreed amounts
under either section 162 or section 212 as the Court may
determine. Petitioner contends that the additional deductions
are allowable as ordinary and necessary business expenses under
section 162. Respondent contends that the additional deductions
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