- 29 -
punitive damages, we must estimate the portion of the payment
attributable to each. Cf. Bayou Verret Land Co. v. Commissioner,
450 F.2d 850, 858 (5th Cir. 1971), affg. in part, revg. in part
and remanding 52 T.C. 971 (1969); Cohan v. Commissioner, 39 F.2d
540, 543-544 (2d Cir. 1930); Vanicek v. Commissioner, 85 T.C.
731, 742-743 (1985). In such an instance, we make as close an
approximation as possible and may choose to bear heavily upon the
taxpayer “whose inexactitude is of his own making.” Cohan v.
Commissioner, supra at 543-544. Given that there is little or no
evidence of the extent of economic damages to the well caused by
Halliburton’s delay in controlling the blowout, and the inherent
imprecision in measuring mental anguish or punitive damages, we
estimate that half of the Halliburton settlement ($100,000) was
paid to settle the claim for economic damages to the well and
therefore is not excludable from petitioners' gross income.8 We
estimate that the remaining $100,000 was paid to settle Mr.
Burditt's claim for mental anguish or for punitive damages.
Guided by the pleadings filed by CRI and Mr. Burditt which sought
$10 million in actual damages and $5 million in punitive damages,
we allocate two-thirds of the remaining $100,000 as paid in lieu
of defending against Mr. Burditt's claim for mental anguish and
8 To the extent amounts were paid to CRI rather than
petitioners, we sustain respondent’s determination, which
petitioners have not addressed, that petitioners received
constructive dividends from CRI.
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