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credit union's board of directors. Instead, respondent countered
with the assertion that petitioners failed to carry their burden
of proof as to the intent of the payor credit union. We reject
this assertion.
Respondent does not dispute that payments received on
account of traditional causes of action for libel, slander,
personal embarrassment, or defamation are excludable from gross
income, whether the damage is to the taxpayer's personal or
professional reputation. See Threlkeld v. Commissioner, 87 T.C.
1294 (1986), affd. 848 F.2d 81 (6th Cir. 1988).
Other evidence shows that some of the payments were
motivated by claims that were not "on account of personal
injuries" within the scope of section 104(a)(2) and,
consequently, are includable in petitioner's gross income.
Accordingly, it is our best judgment, based on the record as
a whole, that 60 percent of the payments are allocable to the
potential claim for defamation and damage to professional
reputation and 40 percent to the other potential claims.
Therefore, we hold that 60 percent of the payments received by
petitioner are excludable from his gross income under section
104(a)(2), and the remainder is includable in his gross income.
Issue 2. Deductibility of Attorney's fees
Having concluded that 60 percent of the payments to
petitioner are excludable from gross income and 40 percent are
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