- 13 -
to consider in applying section 104(a)(2). Knuckles v.
Commissioner, 349 F.2d 610, 612 (10th Cir. 1965), affg. T.C.
Memo. 1964-33; Stocks v. Commissioner, 98 T.C. 1, 10 (1992).
As indicated in our findings of fact, the credit union's
board of directors had several motives for making the payments to
petitioner. The documentary or testimonial evidence shows that
such motives were to avoid (1) a suit for libel, defamation, or
damage to petitioner's professional reputation; (2) a suit for
age discrimination or wrongful discharge; (3) expenses of
litigation; and (4) claims for breach of an implied employment
contract. In addition, the board wanted to provide petitioner
with retirement pay. Because the intent of the credit union in
making payments to petitioner is derived from all of the above
motives, we think an allocation of the payments is appropriate
and necessary under these facts and circumstances. Stocks v.
Commissioner, supra at 16-17.
In view of the testimony of Hugo W. Wandt, Jr., and Richard
H.E. Smith, who were members of the credit union's board of
directors, and William French, an attorney who represented
petitioner in negotiations with the board, we are persuaded that
the claim for defamation and damage to professional reputation
was the predominant reason motivating the credit union's payments
to petitioner. Respondent did not attempt to rebut this
testimony by calling witnesses, especially other members of the
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