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excludable under [section 104(a)(2)]”. Petitioners state: “No
special causation analysis was utilized in the Noel and
Knevelbaard decisions nor was one necessary.” In the Noel case,
the taxpayer had sued PepsiCo, Inc. (PepsiCo), claiming both
breach of contract and tortious interference with contractual
rights and prospective business advantages. The case was
settled, and the taxpayer received an undifferentiated amount in
settlement of all of his claims. We found that PepsiCo’s actions
had caused the taxpayer to suffer emotional distress and had
resulted in damage to the taxpayer’s business reputation. We
also found that the settlement payment was intended to settle
both the taxpayer’s contract claims and the tort claims. We
divided the settlement amount between those two categories and
held that the amount allocable to the tort claims was excludable
under section 104(a)(2). A fair reading of our report is that we
included as a tort claim the claim for damage to the taxpayer’s
business reputation (the business reputation claim). We did not
state how much (if any) of the tort claim recovery was allocable
to the business reputation claim, but it is a fair reading of our
report that some of it was. We did not discuss at length our
reasons for concluding that the unstated allocation to the
business reputation claim was on account of personal injuries
within the meaning of section 104(a)(2). We did find, however,
that, during settlement negotiations, the taxpayer had discussed
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