William T. and Kathryn A. Kees - Page 7

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          disability plan and paid all the premiums.  Petitioners did not             
          include the premiums in income.  Thus, the application of section           
          105(a) turns on whether the first condition is met; i.e., whether           
          the lump-sum payment constitutes “amounts received * * * through            
          accident or health insurance”.4                                             
               Petitioners argue that the $135,000 lump sum petitioner                
          received from UNUM was not paid under the disability plan.                  
          Petitioners base their argument on the assertion that there is no           
          provision in the disability plan authorizing UNUM to offer a                
          lump-sum payment to an employee in lieu of future payments under            
          the plan.  When an amount is paid in settlement, we look to the             
          specific claims for which the settlement was paid.  See Allen v.            
          Commissioner, T.C. Memo. 1998-406 (citing Bagley v. Commissioner,           
          105 T.C. 396, 406 (1995), affd. 121 F.3d 393 (8th Cir. 1997)).              
          If the language of the settlement agreement is not clear, we look           
          to the intent of the payor, considering all the facts and                   
          circumstances.  See Allen v. Commissioner, supra (citing Knuckles           
          v. Commissioner, 349 F.2d 610, 613 (10th Cir. 1965), affg. T.C.             
          Memo. 1964-33, and Robinson v. Commissioner, 102 T.C. 116, 127              
          (1994), affd. in part and revd. and remanded in part 70 F.3d 34             
          (5th Cir. 1995)).  The record does not contain any documents                
          relating to the settlement or any information about the terms of            

               4 The $150,646 that petitioner received during the year in             
          issue comprises the lump-sum settlement of $135,000 and $15,646             
          in monthly benefits.  Petitioners make no argument concerning the           
          $15,646 in monthly benefits, and there is no question that these            
          amounts constitute “amounts received * * * through accident or              
          health insurance”.                                                          

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