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extent that he did, the funds are excludable from his gross
income. Sec. 104(a)(2). To the extent that he did not, the
funds are includable in his gross income. Sec. 61(a). Because
respondent determined that none of the proceeds are excludable
from petitioner's gross income under section 104(a)(2),
petitioner must prove otherwise. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933); Robinson v. Commissioner,
102 T.C. 116, 124 (1994), affd. in part, revd. in part on an
issue not relevant herein and remanded 70 F.3d 34 (5th Cir.
1995).
Petitioner argues that the settlement proceeds are
excludable from his gross income because the settlement agreement
states explicitly that he received the proceeds for a personal
injury. Petitioner alleges that his litigation with Balfour was
adversarial and that he entered into the allocation set forth in
the settlement agreement to "maximize his relatively meager
recovery". Petitioner alleges that his cause of action against
Balfour for constructive discharge was real. Respondent argues
that none of the $425,000 is excludable from petitioner's gross
income because none of it was paid to him for a personal injury.
Respondent argues that the allocation set forth in the settlement
agreement should be disregarded because it was not the product of
arm's-length negotiations between Balfour and petitioner.
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