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an action based upon tort or tort type rights; and (2) on account
of personal injuries or sickness. Commissioner v. Schleier,
supra; Wesson v. United States, 48 F.3d 894, 901-902 (5th Cir.
1995); Bagley v. Commissioner, 105 T.C. 396, 416 (1995), affd. __
F.3d __ (8th Cir., Aug. 6, 1997).
When damages are received pursuant to a settlement
agreement, the nature of the claim that was the actual basis for
settlement controls whether such damages are excludable under
section 104(a)(2). United States v. Burke, 504 U.S. 229, 237
(1992); Thompson v. Commissioner, 866 F.2d 709, 711 (4th Cir.
1989), affg. 89 T.C. 632 (1987); Robinson v. Commissioner, 102
T.C. 116, 126 (1994), affd. in part, revd. in part and remanded
70 F.3d 34 (5th Cir. 1995). "[T]he critical question is, in lieu
of what was the settlement amount paid?" Bagley v. Commissioner,
supra at 406.
Determination of the nature of the claim is factual. Id.;
Stocks v. Commissioner, 98 T.C. 1, 11 (1992). The first
requirement is the existence of a claim based upon tort or tort
type rights. Commissioner v. Schleier, supra at 337. The claim
must be bona fide, but not necessarily valid; i.e., sustainable.
Taggi v. United States, 35 F.3d 93, 96 (2d Cir. 1994); Robinson
v. Commissioner, supra at 126; Stocks v. Commissioner, supra at
10.
Petitioner here was a long-term employee (almost 20 years)
of a business enterprise. During that employment, he progressed
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