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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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