Lance R. and Elaine C. LeFleur - Page 20

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            680 (1982).  While the underlying litigation was certainly                                
            adversarial, by the time the settlement agreement was executed on                         
            December 2, the parties were no longer adversaries.  See Robinson                         
            v. Commissioner, supra at 133.  An agreement in principle had                             
            already been reached on Thanksgiving Day, and was expressly                               
            referred to in the settlement agreement.  The record reflects                             
            that Blount was not concerned with the amount of the settlement                           
            proceeds that was allocated to tortlike personal injury damages                           
            vis-a-vis other damages.  As a result, petitioner in effect was                           
            able to unilaterally allocate the proceeds.  The defendant's only                         
            concerns were that all of petitioner's claims be settled and that                         
            nothing be done to compromise the deductibility of the settlement                         
            to Blount.  While not controlling, the deductibility of the                               
            payor's payment is a factor to be considered in determining                               
            whether the parties have adverse interests in regard to their                             
            allocations.  See McKay v. Commissioner, 102 T.C. at 485.                                 
            Indeed, we agree with respondent that, to the extent that such an                         
            allocation resulted in a larger net recovery to petitioner and                            
            had no corresponding negative impact on Blount, such allocation                           
            was equally favorable to Blount in that it aided its ability to                           
            resolve the lawsuit for the smallest settlement payment amount                            
                  Moreover, as in Robinson v. Commissioner, supra at 129, and                         
            Bagley v. Commissioner, supra at 409, but unlike McKay v.                                 
            Commissioner, supra at 472, the allocation did not accurately                             

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