F. Browne Gregg, Sr., and Juanita O. Gregg - Page 2




                                        - 2 -                                          
               After stipulations and concessions,1 the remaining issues               
          for consideration are:  (1) Whether a jury award paid to                     
          petitioner husband pursuant to a judgment against U.S.                       
          Industries, Inc. (USI), on a claim for fraudulent inducement to              
          enter into a contract is excludable under section 104(a)(2) as               
          damages received on account of personal injury.  We hold that it             
          is not.  (2) Whether a jury award paid to petitioner husband                 
          pursuant to a judgment against USI on a claim for interference               
          with a business relationship is excludable under section                     
          104(a)(2) as damages received on account of personal injury.  We             
          hold that it is not.  (3) Whether prejudgment interest paid to               
          petitioner husband pursuant to a judgment against USI is                     
          excludable under section 104(a)(2).  We hold that it is not.                 
               Unless otherwise indicated, all section references are to               
          the Internal Revenue Code in effect for the year in issue, and               
          all Rule references are to the Tax Court Rules of Practice and               
          Procedure.                                                                   




               1 The parties stipulate that $2,500,000 in punitive damages             
          awards received by petitioner husband is properly includable in              
          petitioners' gross income.  The parties further stipulate that               
          should this Court find that the $8,128,515 in compensatory                   
          damages received by petitioner husband for his fraud claim are               
          properly includable in petitioners' income, then such damages are            
          properly characterized as capital gain rather than ordinary                  
          income.  On brief, petitioners concede that the $103,341 awarded             
          for petitioner husband’s breach of contract claims is includable             
          in gross income.                                                             




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