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injury to personal reputation and injury to business reputation
and held that damages awarded on account of defamation resulting
in injury to business reputation did not give rise to damages
received on account of personal injuries within the meaning of
section 104(a)(2). We did not, in Threlkeld, adopt a per se rule
that damages received on account of injury to an individual’s
business reputation are excludable under section 104(a)(2). We
described the necessary determination as presenting a question of
fact. Threlkeld v. Commissioner, supra at 1305. We said that
the determination depended on the nature of the claim presented,
and we looked to all the facts and circumstances of the case,
including the State law characterization of the claim in question
(a claim for malicious prosecution) to determine the nature of
that claim. Id. at 1307-1308. We found that an action for
malicious prosecution is similar to an action for defamation and
concluded that it would be classified as an action for personal
injuries under Tennessee law. Id. at 1307. We concluded that
the payment received for the release of the taxpayer’s claims
against the defendant for damage to the taxpayer’s professional
reputation was excludable under section 104(a)(2).
Petitioners direct our attention to two recent memorandum
opinions, Knevelbaard v. Commissioner, T.C. Memo. 1997-330, and
Noel v. Commissioner, T.C. Memo. 1997-113, for the proposition
that “business reputation damages arising in tort actions are
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