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confidential letters to Anacker on March 21, 1991. In one of
these letters, petitioner stated that:
We discussed that this settlement would be in payment
of my tort claim thereby making the settlement non-
taxable. This is very important to me. In my opinion
such a settlement can be made and therefore I must
insist on such terms.
In the second letter, petitioner wrote:
I have also revised the lump sum settlement amount
pursuant to our conversations to account for deductions
made from my last check. Moreover, I have shortened
the period that ABMI would pay for my medical/dental
benefits. In effect, the gross number is $21,000, less
than a hundred dollar rounding bias in my favor.
Clearly too, a round number would be a great asset in
beating an IRS audit should I be challenged.
On April 18, 1989, petitioner and Anacker signed a final
settlement agreement (hereinafter the agreement). In pertinent
part, the agreement provides that:
A. CONDITIONS OF AGREEMENT
1. This AGREEMENT is based on the fact that
FOSTER may otherwise institute or continue actions or
participate in actions against ABMI arising from
FOSTER'S employment or the severance thereof and/or
conduct affecting in any way their relationships to
date. FOSTER and ABMI desire to completely resolve and
settle any and all such disputed claims FOSTER may have
against ABMI.
2. The terms of this AGREEMENT set forth the full
obligations of the parties. The parties have no
further obligations aside from those expressed in this
AGREEMENT.
3. It is agreed and understood by the parties
that neither the fact that settlement has occurred nor
the fact that ABMI provides consideration for the
release of claims can be construed as an admission of
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