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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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