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settlement that the settlement amount did not include costs or
interest.
In contrast, the parties here did not agree that the
settlement amount did not include costs or interest. Petitioners
point out that the stipulation to dismiss the tort action filed
with the Superior Court specified "No costs. No interest" and
contend that the stipulation to dismiss controls the allocation
of interest in the settlement at issue. We rejected this
argument in Rozpad v. Commissioner, T.C. Memo. 1997-528, where we
said: "the stipulations are not part of the settlement and do
not relate to the allocation of settlement proceeds. They are
merely requests for the court to dismiss the * * * [action]
without imposing interest or costs."
C. Conclusion
Applying the allocation formula in Rozpad, we conclude that
$78,190 (i.e., 42.53 percent of $183,852) of the settlement paid
for the Woodses and $790,587 (i.e., 42.53 percent of $1,858,948)
of the settlement paid for Jacquelyn was prejudgment interest and
is not excludable from income under section 104.
To reflect the foregoing,
Decisions will be entered
for respondent.
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