Ferdinand A. & Marla Morabito, et al. - Page 5

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          no settlements for IBM and petitioners to reach.  Petitioners               
          "waived all claims before asserting them, so this cannot be a               
          damage settlement by definition."  Taggi v. United States, 835 F.           
          Supp. 744, 746 (S.D.N.Y. 1993), affd. 35 F.3d 93 (2d Cir. 1994).            
               However, even if we assume that the signed Releases                    
          represent settlement agreements, for the awards to be excludable            
          under section 104(a)(2), petitioners must demonstrate (1) "that             
          the underlying cause of action giving rise to the recovery is               
          'based upon tort or tort type rights'" and (2) "that the damages            
          were received 'on account of personal injuries or sickness.'"               
          Commissioner v. Schleier, 515 U.S. 323, 337 (1995).                         
          1.  Underlying cause of action                                              
               The nature of the claim controls whether a damage amount is            
          excludable from gross income.  Stocks v. Commissioner, 98 T.C. 1,           
          10 (1992).  Determining the nature of the claim is a factual                
          matter.  Sodoma v. Commissioner, T.C. Memo. 1996-275.  If there             
          is no express language in the agreement explaining why the                  
          settlement amount is being paid, the most important factor is               
          "the intent of the payor".  Stocks v. Commissioner, supra.                  
               The best indicator of the intent of the payor in this case             
          is the language of the Release.  The Release freed IBM from "all            
          claims, demands, actions or liabilities you may have against IBM            
          which are related to your employment with IBM or the termination            
          of that employment."  The Release covered ADEA claims, employment           

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