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personal injury lawsuit damages that were awarded by reason of,
or because of, the personal injuries”. Id. at 83.
Respondent concedes that petitioner’s causes of action for
fraud and interference with a business relationship sounded in
tort. The question for our consideration, then, is whether
petitioner’s recoveries on these claims were “on account of
personal injuries or sickness”. This determination is based on
all the facts and circumstances, Fabry v. Commissioner, 111 T.C.
__, __ (1998) (slip op. at 10), which in the context of litigated
claims include the allegations in petitioner’s complaints, the
evidence presented, and the arguments made in the underlying
litigation, Metzger v. Commissioner, 88 T.C. 834, 848 (1987),
affd. without published opinion 845 F.2d 1013 (3d Cir. 1988);
Bent v. Commissioner, 87 T.C. 236, 245 (1986), affd. 835 F.2d 67
(3d Cir. 1987); Seay v. Commissioner, 58 T.C. 32, 37 (1972). The
taxpayer bears the burden of proof. Rule 142(a).2
It is well settled that "personal injuries" include
intangible as well as tangible harms, and nonphysical as well as
2 Respondent argues that petitioner is collaterally estopped
from claiming the damages he received were on account of personal
injuries, because the jury instructions and appellate decisions
in the underlying litigation make it clear, in respondent’s view,
that petitioner’s injuries were not personal. We reject
respondent’s strained and peculiar theory of collateral estoppel
if for no other reason than because the characterization of
petitioner’s damages for Federal income tax purposes was not
essential to and was not litigated in petitioner’s prior
litigation. See Kightlinger v. Commissioner, T.C. Memo. 1998-
357. We have, however, considered the contents of the jury
instructions and the appellate decisions as part of our factual
inquiry in determining the basis upon which petitioner’s damage
awards were made.
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