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As this Court recently noted in Fabry v. Commissioner, 111
T.C. __, __ (1998) (slip op. at 8), Threlkeld v. Commissioner,
supra, did not adopt a per se rule that damages received on
account of injury to an individual’s business reputation are
excludable under section 104(a)(2). Rather, we must look to all
the facts and circumstances to determine the nature of the claim.
Id. Whether or not the fraud perpetrated upon petitioner may
have resulted in some dignitary injury is not controlling.
Rather, petitioners must show that the damages received were on
account of personal injury and that the personal injury affected
the amount of recovery. See Commissioner v. Schleier, supra at
336-337 (settlement amounts received by the taxpayer in
settlement of his claim under the Age Discrimination in
Employment Act (ADEA) were not on account of personal injuries,
notwithstanding that the taxpayer may have suffered some personal
injury comparable to pain and suffering).
We look to petitioner’s complaints in the USI litigation to
determine the nature of his claim. The overwhelming thrust of
petitioner’s complaints is the adverse effects USI’s actions had
on his businesses and on his “earn-out” rights that arose out of
and were dependent on petitioner's contract with USI. In his
restated complaint in the second jury trial, petitioner asked for
$15 million in compensatory damages. The complaint
particularized these damages to a degree, alleging that
petitioner had been deprived of the value of his companies and
their businesses “which had a value of at least $10 million”, and
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