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husband, and the term "petitioner" will be used henceforth to
refer to Lance R. LeFleur).
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year at issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
After concessions, the issues remaining for decision are as
follows:
(1) Whether $800,000 of the $1 million lump sum paid to
petitioner in 1991 in settlement of a suit against his former
employer is excludable from petitioners' gross income under
section 104(a)(2) as damages received on account of personal
injuries. We hold that it is not.
(2) Whether petitioners may deduct legal fees and costs
incurred in bringing the suit as Schedule C expenses to the
extent that such fees are allocable to taxable income. We hold
that they may not.
Some of the facts are stipulated and are found accordingly.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. Petitioners resided in
Montgomery, Alabama, at the time they filed their petition in
this case.
FINDINGS OF FACT
In 1984, petitioner was hired as vice president for Blount
Energy Resource Corp. (BERC), a wholly owned subsidiary of
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