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received on account of a personal injury claim traditionally
involve payment for harms such as pain and suffering, emotional
distress, harm to reputation, or other consequential damages.
See United States v. Burke, supra at 239.
When determining the tax consequences of an amount paid in
settlement of a suit, it is the nature of the underlying claim,
not its validity, that determines whether the payment was
received on account of personal injuries. See id. at 237; Fabry
v. Commissioner, 111 T.C. 305, 308 (1998); Threlkeld v.
Commissioner, 87 T.C. 1294, 1297 (1986), affd. 848 F.2d 81 (6th
Cir. 1988); Glynn v.Commissioner, 76 T.C. 116, 119 (1981), affd.
without published opinion 676 F.2d 682 (1st Cir. 1982). In
seeking the nature of the underlying claim, the court should
consider, “‘In lieu of what were the damages awarded?’” Robinson
v. Commissioner, 102 T.C. 116, 126 (1994)(citing Raytheon Prod.
Corp. v. Commissioner, 144 F.2d 110, 113 (1st Cir. 1944), affg. 1
T.C. 952 (1943)(emphasis added)). Whether the nature of the
underlying claim is for a tort type personal injury is a question
of fact, which is determined by considering the settlement
agreement in light of all the facts and circumstances, including
the allegations made in the State court proceedings, the evidence
marshaled, the arguments made by the parties, and the intent of
the payor of the settlement. See Robinson v. Commissioner, supra
at 127. Paramount to this inquiry is the payor's intent in
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