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pursuant to section 104(a)(2). Respondent cites Taggi v. United
States, 35 F.3d 93, 96 (2d Cir. 1994), where the court concluded,
after noting that no "claims or threats of litigation" existed,
that the settlement payment "did not constitute a 'settlement
agreement entered into in lieu of . . . [a legal suit or action
based upon tort or tort type rights].'" The court expressly
stated that "Because no prosecution of a suit for personal
injuries" preceded the settlement, the taxpayer's right to
exclude the settlement proceeds from gross income "depends upon
whether the [settlement] agreement constituted a 'settlement
agreement . . . in lieu of such prosecution.'" Id. at 95.
Accordingly, the court examined whether the settlement proceeds
were attributable to a bona fide dispute based upon tort or tort
type rights. Contrary to respondent's interpretation of Taggi,
we view the court's statement that no "claims or threats of
litigation" existed as merely supporting the court's conclusion
that the settlement proceeds were not attributable to a bona fide
dispute based upon tort or tort type rights, not a statement of
law that the failure to file a claim before signing a settlement
agreement precludes exclusion of the settlement proceeds from
gross income pursuant to section 104(a)(2).
As stated supra, pursuant to section 104(a)(2) and the
regulations thereunder, the exclusion from gross income applies
to damages received by "suit" or by "settlement agreement" in
lieu of such a suit. Respondent has not cited, and we have not
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