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Respondent's determination is presumed to be correct, and
petitioners bear the burden of proving otherwise. Rule 142(a).
We must decide whether, and, if so, to what extent the
settlement petitioners received was prejudgment interest, and
whether it is excludable from income under section 104(a)(2).
In Rozpad v. Commissioner, supra, the U.S. Court of Appeals
for the First Circuit, the circuit in which this case is
appealable, approved the Tax Court's allocation of the
prejudgment interest component of a settlement under Rhode Island
law where the parties did not allocate any amount to prejudgment
interest. The allocation of prejudgment interest in Rozpad was
calculated by applying a ratio based on the judgment of the State
court, to apportion the total settlement between prejudgment
interest (added to the State court's tort damage award under R.I.
Gen. Laws section 9-21-10) and compensatory damages. Rozpad is
indistinguishable from this case.
The clerk of the Rhode Island court calculated a prejudgment
interest component of $88,800 to the Woodses' award and $888,000
to Jacquelyn's award under R.I. Gen. Laws section 9-21-10, which
was 42.53 percent of each total award. Respondent determined
that $78,190 of the $183,852 settlement with the Woodses and
$790,587 of the $1,858,948 settlement with Jacquelyn was
prejudgment interest by using as the ratio of prejudgment
interest to total settlement the same ratio that the clerk of the
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