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personal injuries" includes both nonphysical and physical
injuries. United States v. Burke, 504 U.S. 229, 235 n.6 (1992);
Threlkeld v. Commissioner, 848 F.2d 81, 84 (6th Cir. 1988), affg.
87 T.C. 1294, 1308 (1986). Section 104(a)(2) has been held to
apply to several types of nonphysical personal injuries, such as
emotional distress, United States v. Burke, supra; mental pain
and suffering, Bent v. Commissioner, 835 F.2d 67 (3d Cir. 1987),
affg. 87 T.C. 236 (1986); indignity, humiliation, inconvenience,
pain and distress of mind, and prevention from attending usual
pursuits, Threlkeld v. Commissioner, supra at 81-82; and injury
to personal, professional, and credit reputation, Church v.
Commissioner, 80 T.C. 1104 (1983). The evidence before the Court
is that PepsiCo's actions caused petitioner to suffer emotional
distress and resulted in damage to petitioner's business
reputation.8 Petitioner discussed these damages with Mr. Dickie
during the settlement negotiations. The payment made by PepsiCo
was intended to settle both the contract claims and the tort
claim. Thus, we conclude that part of the settlement payment was
excludable, and part was not excludable under section 104(a)(2).
If a settlement payment covers both contract claims and
excludable tort claims, then we may allocate amounts to each
claim. Stocks v. Commissioner, 98 T.C. 1, 14 (1992); Eisler v.
8When contracts are interfered with in a tortious manner, a
litigant may recover damages for emotional distress. McLoughlin
v. Golf Course Superintendents Association of Am., No. 85-4499-R
(D. Kan., Apr. 8, 1991).
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