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A motion for summary adjudication may be granted if the
pleadings and other materials demonstrate that no genuine issue
of material fact exists, and the decision may be rendered as a
matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98
T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994). As
noted above, the parties agree that the issues in this case may
be resolved by summary adjudication, and we are satisfied that no
genuine issue exists as to the material facts.
First, we address whether the punitive damages petitioner
received may be excluded under section 104(a)(2). Respondent
contends that this issue is controlled by the recent Supreme
Court decision in O'Gilvie v. United States, 519 U.S. 79, 117
S. Ct. 452 (1996). In O'Gilvie v. United States, supra, the
Supreme Court held that the exclusion of section 104(a)(2) does
not apply to punitive damages. Id. at ___, 117 S. Ct at 454.
Therefore, respondent argues that petitioner's punitive damage
award of $6 million is fully taxable.
Petitioner points out that the Supreme Court in O'Gilvie v.
United States, supra, interpreted section 104(a)(2) as it read in
1988. Petitioner notes that section 104(a)(2) was amended in
1989, and since the award was paid to petitioner in 1992,
petitioner argues that the rule in O'Gilvie does not apply to
this case. We disagree. The 1989 amendment to section 104(a)(2)
was enacted in the Omnibus Budget Reconciliation Act of 1989
(OBRA 1989), Pub. L. 101-239, sec. 7641(a), 103 Stat. 2106, 2379.
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