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upon tort or tort type rights, the damages were received on
account of personal injuries or sickness. Commissioner v.
Schleier, 515 U.S. 323, 337 (1995). Petitioner must prove the
existence of both of these elements.
In the instant cases, we find that petitioners failed to
establish that WNIC awarded petitioner the annuity on account of
personal injuries or sickness. The phrase "on account of"
requires a causal connection between the personal injury
sustained and the compensation received. O'Gilvie v. United
States, 519 U.S. 79 (1996); Brabson v. United States, 73 F.3d
1040 (10th Cir. 1996).
Although petitioners contend that petitioner suffered
personal injuries to his good name, personal integrity, and
business reputation, the Settlement Agreement does not provide
for any part of the payment to be on account of personal
injuries. Further, petitioners failed to introduce any competent
evidence to prove that WNIC intended to make payments to
petitioner on account of personal injuries.
We find that WNIC's intent when it entered into the
Settlement Agreement was to settle a contract dispute and not to
settle a tort or tort type claim or a claim for personal
injuries. Accordingly, we conclude that section 104(a)(2) does
not apply to exclude the $17,880 portion of the settlement
payment from gross income.
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