William J. Goeden and Carol S. Goeden - Page 14

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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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