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insisted on the allocation language as originally proposed.
Halliburton’s counsel relented, after concluding that since
Halliburton had been granted summary judgment on CRI’s claims,
CRI’s agreement to dismiss its appeal of the summary judgment
order would make it final, thus foreclosing any reassertion of
CRI’s claims.
On September 14, 1992, the parties executed a settlement
agreement under which Halliburton paid $200,000 in exchange for
CRI’s and petitioner’s dismissal of all actions against
Halliburton. The allocation language included in the Halliburton
settlement agreement, which was modeled after the language
previously used in the Lindsey settlement agreement, stated:
For the purposes of allocating damages between CRI and
Burditt in the settlement of these actions, Two Hundred
Thousand and no/100 Dollars ($200,000.00) shall be
credited to [Mr. Burditt], Individually, for mental
anguish, pain and suffering, damage to his reputation
and loss of good will.
On September 4, 1992, the petitioners deposited
Halliburton's check in the amount of $200,000, payable to both
CRI and petitioner, in Mrs. Burditt's personal bank account.
OPINION
The controversy in this case centers on the tax treatment of
the Lindsey and Halliburton settlement payments that petitioner
received in 1992. Petitioners contend that the settlement
payments were received on account of Mr. Burditt’s personal
injuries and are therefore excludable from gross income under
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