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the Weisel payment was received in consideration for petitioner's
transfer to Weisel of part of petitioner’s substantially larger
interest in Biomass. Petitioner bears the burden of proof,
Rule 142(a), and has failed to prove that the Weisel payment
constitutes an amount of damages received on account of personal
injuries.
B. Biomass Lawsuit
Section 1.104-1(c), Income Tax Regs., interprets section
104(a)(2) as follows:
Section 104(a)(2) excludes from gross income the amount
of any damages received (whether by suit or agreement)
on account of personal injuries or sickness. The term
“damages received (whether by suit or agreement)” means
an amount received (other than workmen's compensation)
through prosecution of a legal suit or action based
upon tort or tort type rights, or through a settlement
agreement entered into in lieu of such prosecution.
The settlement proceeds do not constitute damages received
on account of personal injuries (to petitioner) within the
meaning of section 104(a)(2). The third amended complaint, which
was the basis for the settlement agreement, makes no claims for
damages due to personal injuries to petitioner. The settlement
agreement makes no allocation to claims for such damages, and
petitioner has failed to show that the S-P parties intended to
settle any claims for personal injuries to petitioner. See
Stocks v. Commissioner, 98 T.C. 1, 10 (1992) ("the most important
factor in determining any exclusion under section 104(a)(2) is
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