E. Pauline Barnes - Page 7

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          determination that the settlement proceeds are not damages on               
          account of personal injuries or sickness is erroneous.  Welch v.            
          Helvering, 290 U.S. 111, 115 (1933).                                        
               The first place we look to for a characterization of the               
          proceeds is the settlement agreement itself.  See Bagley v.                 
          Commissioner, supra at 406.  However, the settlement agreement in           
          this case does not provide any indication as to what type of                
          damages the settlement proceeds were paid in lieu of.  Rather,              
          the agreement generally refers to a release of all claims which             
          petitioner may have had in connection with the termination of her           
          employment, including all claims asserted in her wrongful                   
          termination action.                                                         
               Where the settlement agreement does not expressly specify an           
          allocation of the proceeds among the various claims, the most               
          important factor in deciding how to allocate the proceeds is what           
          motivated the payor to pay the settlement amount.  Knuckles v.              
          Commissioner, 349 F.2d 610, 613 (10th Cir. 1965), affg. T.C.                
          Memo. 1964-33.  In determining the intent of the payor, we may              
          look at the pleadings, jury awards, or any other Court orders or            
          judgments.  Miller v. Commissioner, T.C. Memo. 1993-49,                     
          supplemented by T.C. Memo. 1993-588, affd. without published                
          opinion 60 F.3d 823 (4th Cir. 1995).  Again, these sources do not           
          provide much information.  We have no jury award or Court order             
          or judgment in our record.  The petition in the wrongful                    
          termination case claims damages for mental distress and past and            

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