John R. and Sara E. Wise - Page 9

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          personal injuries or sickness".  The regulations provide that "The          
          term 'damages received (whether by suit or agreement)' means an             
          amount received * * * through prosecution of a legal suit or action         
          based upon tort or tort type rights, or through a settlement                
          agreement entered into in lieu of such prosecution."  Sec. 1.104-           
          1(c), Income Tax Regs.  Thus, in order to exclude damages from gross        
          income pursuant to section 104(a)(2), the taxpayer must prove that:         
          (1) The underlying cause of action is based upon tort or tortlike           
          rights, and (2) the damages were received on account of personal            
          injuries or sickness.  Commissioner v. Schleier, supra at 336-337.          
               Where amounts are received pursuant to a settlement agreement,         
          the nature of the claim that was the actual basis for settlement            
          controls whether such amounts are excludable from gross income under        
          section 104(a)(2).  United States v. Burke, 504 U.S. 229, 237               
          (1992).  The crucial question is "in lieu of what was the settlement        
          amount paid?"  Bagley v. Commissioner, 105 T.C. 396, 406 (1995),            
          affd. 121 F.3d 393 (8th Cir. 1997). Determining the nature of the           
          claim is a factual inquiry.  Robinson v. Commissioner, 102 T.C. 116,        
          127 (1994), affd. in part, revd. in part and remanded 70 F.3d 34            
          (5th Cir. 1995).                                                            
               In the instant case, it is unclear that the General Release            
          included  a  settlement  of  petitioner's  claims  for  wrongful            
          termination rather than a general severance package.  But even              
          assuming arguendo that it did include a settlement for some type of         

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