William Roger and Joan Ann Thorpe - Page 11

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          settlement.  We agree with respondent that the ITO payment is not           
          excludable from petitioners' gross income.                                  
               Petitioners do not allege, nor does the record otherwise               
          show, that petitioner ever made any formal or informal claim                
          against IBM.  It therefore appears that there was no settlement             
          for IBM and petitioner to reach.                                            
               However, even if we assume that the executed Release                   
          represents a settlement agreement, then for the payment to be               
          excludable, petitioners must show that the payment is based upon            
          (1) tort or tort-type rights, and (2) on account of personal                
          injuries or sickness.                                                       
               We now turn to the language of the release itself.  The                
          release in this case is the same as that in Webb v. Commissioner,           
          T.C. Memo. 1996-50, and essentially the same as that in Sodoma v.           
          Commissioner, supra.  By its terms, petitioner released IBM from            
          liability for both contract and tort claims.  The release,                  
          however, does not specifically indicate that the lump-sum payment           
          received by petitioner was paid to settle a potential personal              
          injury claim against IBM.  We note that when the settlement                 
          agreement lacks express language stating what the settlement                
          amount was paid to settle, then the most important factor is the            
          intent of the payor.  Knuckles v. Commissioner, 349 F.2d 610, 612           
          (10th Cir. 1965), affg. T.C. Memo. 1964-33; Stocks v.                       
          Commissioner, supra at 10.  Here, respondent contends, and we               





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