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As with the allocation in the Lindsey agreement, we
disregard the allocation in the Halliburton settlement agreement
as it was not the product of adversarial negotiation.
b. Nature of the Underlying Claim
Disregarding the allocation in the settlement agreement, we
look to the nature of the underlying claim for which the
settlement was paid. See Robinson v. Commissioner, supra at 126;
Threlkeld v. Commissioner, 87 T.C. at 1297. Unlike his claims
against Lindsey, Mr. Burditt in every version of the petitions
asserted tort type claims against Halliburton for mental anguish,
as follows:
CRI and Burditt would show that Halliburton's actions
contributed to damage occurring to the Davis No. 1 well
and that that has caused CRI and Burditt economic
damages * * *. Additionally, Burditt would show that
Halliburton's actions constituted duress and caused him
severe embarrassment and mental anguish.
Respondent argues that, notwithstanding the repeated
references to mental anguish in the petitions, Mr. Burditt
abandoned his mental anguish claims during the course of the
litigation. Respondent relies on several factors to support this
interpretation. Respondent places particular emphasis on
petitioner’s and CRI’s response to a Halliburton interrogatory
asking the nature of the damages Halliburton caused to CRI and
petitioner, in which they cite only economic damages to the well.
Respondent also points out that during discovery Halliburton
never took Mr. Burditt's deposition, that Halliburton addressed
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