- 16 -
making the settlement payment. See Knuckles v. Commissioner, 349
F.2d 610, 613 (10th Cir. 1965), affg. T.C. Memo. 1964-33;
Robinson v. Commissioner, supra at 127. Any one of these factors
may be either persuasive or ignored. See Threlkeld v.
Commissioner, supra at 1306.
If the settlement agreement expressly allocates the
settlement between tort type personal injury damages and other
damages, it will be respected for tax purposes to the extent that
the parties entered into the agreement in an adversarial context
at arm's length and in good faith. See Robinson v. Commissioner,
supra at 127. Express allocations in a settlement agreement are
respected if the parties are adversarial with respect to those
allocations and not merely adverse as to the total sum of the
settlement. See Robinson v. Commissioner, supra. The
determination of whether the parties are adversarial for this
purpose is a question of fact.3 See Robinson v. Commissioner, 70
F.3d 34, 38 (5th Cir. 1995), affg. in part, revg. in part on
another ground and remanding 102 T.C. 116 (1994).
3 In their reply brief, petitioners assert for the first
time that any testimony contradicting the express language of the
settlement agreement contravenes the parol evidence rule and
therefore should be disregarded. Because this contention was not
timely raised, we shall not consider it.
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