D. Sam Scheele - Page 9

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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            
               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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