Lance R. and Elaine C. LeFleur - Page 17

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            a written settlement agreement.  See, e.g., Bagley v.                                     
            Commissioner, supra; McKay v. Commissioner, 102 T.C. 465 (1994),                          
            vacated and remanded per curiam without published opinion 84 F.3d                         
            433 (5th Cir. 1996); Robinson v. Commissioner, supra; Fono v.                             
            Commissioner, supra; McShane v. Commissioner, T.C. Memo. 1987-                            
            151.  Petitioners aver that the situation herein is almost                                
            identical to that in McKay v. Commissioner, supra, and is                                 
            distinguishable from both Robinson v. Commissioner, supra, and                            
            Bagley v. Commissioner, supra, upon which respondent relies.                              
                 Robinson v. Commissioner, supra, involved an action                                  
            initiated by the taxpayers in State court against a Texas bank                            
            for failure to release its lien on the taxpayers' property.                               
            After the jury returned a verdict in the taxpayers' favor for                             
            approximately $60 million, including $6 million for lost profits,                         
            $1.5 million for mental anguish, and $50 million in punitive                              
            damages, the parties settled.  In the final judgment reflecting                           
            the settlement, which was drafted by the parties and signed by                            
            the trial judge, 95 percent of the settlement proceeds were                               
            allocated to mental anguish and 5 percent were allocated to lost                          
            profits.  We held that the allocation in the final judgment did                           
            not control the tax effects of the settlement proceeds to the                             
            recipients because it was "uncontested, nonadversarial, and                               
            entirely tax motivated" and did not accurately "reflect the                               
            realities of * * * [the parties'] settlement."  Id. at 129.                               

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