E. Pauline Barnes - Page 6

                                        - 6 -                                         
               In addition, the Court of Appeals for the Tenth Circuit, to            
          which any appeal in this case lies, has consistently adhered to             
          the Oklahoma Supreme Court's recognition of this cause of action            
          as one proceeding in tort.  See Dupree v. United Parcel Serv.,              
          956 F.2d 219 (10th Cir. 1992); see also York v. American Tel. &             
          Tel. Co., 95 F.3d 948, 959 (10th Cir. 1996); McKenzie v.                    
          Renberg's, Inc., 94 F.3d 1478, 1488 (10th Cir. 1996).                       
               Petitioner clearly satisfies the first requirement of the              
          Schleier test for excluding from gross income damages received              
          pursuant to a lawsuit.  The petition filed in the wrongful                  
          discharge case alleged that petitioner was terminated in                    
          contravention of the public policy of the State of Oklahoma.  The           
          settlement proceeds were received in lieu of the prosecution of             
          that action.  Since Oklahoma law definitively treats this cause             
          of action for wrongful termination as one proceeding in tort, we            
          hold that petitioner's settlement proceeds were received as                 
          damages through a settlement agreement entered into in lieu of              
          prosecution of an action based upon tort or tort type rights.               
               We must next decide whether the settlement proceeds satisfy            
          the second requirement of the Schleier test that they must be               
          damages received on account of personal injuries or sickness.  In           
          cases involving settlements, the critical question is in lieu of            
          what kind of damages was the settlement amount paid?  Bagley v.             
          Commissioner, 105 T.C. 396, 406 (1995).  As noted above,                    
          petitioner bears the burden of proving that respondent's                    

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  Next

Last modified: May 25, 2011