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although it is a necessary condition of exclusion under section
104(a)(2) that the damages (or settlement amount) in question be
received on account of the prosecution (or settlement) of a suit
or action based on tort or tort type rights, that is not a
sufficient condition for exclusion under section 104(a)(2). The
damages or settlement must be received both on account of a
violation of tort or tort type rights and for personal injuries
or sickness. Id. at 330. The parties here disagree as to
whether the $500,000 payment was received on account of personal
injuries.
C. Arguments of the Parties
The arguments of the parties are straightforward.
Respondent, while conceding that the $500,000 payment was
received in settlement of a claim for tortious injury to business
reputation, argues that it was not received on account of a
personal injury. Petitioners argue that injury to business
reputation is, as a matter of law, a personal injury.
D. Discussion
1. Nature of the Inquiry
We do not agree with petitioners that injury to business
reputation is, as a matter of law, a personal injury. In
Threlkeld v. Commissioner, supra, we decided not to follow our
decision in Roemer v. Commissioner, 79 T.C. 398 (1982), revd. 716
F.2d 693 (9th Cir. 1983), in which we distinguished between
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