Wallace R. Noel and Robinette Noel - Page 17

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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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