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expressly allocated that amount to the tort claim for personal
injuries. In support of their position, petitioners cite Glynn
v. Commissioner, 76 T.C. 116, 120 (1981), affd. without published
opinion 676 F.2d 682 (1st Cir. 1982), in which we stated that the
most important fact in determining the purpose of the payment is
"express language [in the agreement] stating that the payment was
made on account of personal injuries." Petitioners further
maintain that the settlement agreement should be respected by
this Court because it was entered into in good faith between
adverse parties at arm's length. On the other hand, respondent
contends that no part of the settlement proceeds qualifies for
exclusion as "damages received * * * on account of personal
injuries" under section 104(a)(2). On that basis, respondent
maintains that the entire amount of the settlement proceeds, or
$1 million, is includable in petitioners' gross income.
Respondent posits that the express allocation of the proceeds in
the settlement agreement should be disregarded since the
agreement was not entered into by the parties in an adversarial
context at arm's length and in good faith. For the reasons set
forth below, we agree with respondent.
We have had numerous opportunities to address the issue of
the proper allocation of the proceeds of a settlement agreement
in the context of section 104(a)(2). See, e.g., Robinson v.
Commissioner, 102 T.C. 116 (1994), affd. in part, revd. in part
and remanded 70 F.3d 34 (5th Cir. 1995); Horton v. Commissioner,
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