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the settlement. Further, the record contains no direct evidence
about UNUM’s intent in making the lump-sum payment to petitioner.
The record does contain the stipulation that “after protracted
oral negotiations, UNUM paid petitioner a lump-sum settlement of
$135,000 with respect to his disability claim.” Under all the
facts and circumstances, we find that the nature of the claim
underlying the lump-sum payment was UNUM’s liability under the
disability plan. Settlement does not transform the nature of the
payments into something other than “amounts received * * *
through accident or health insurance” within the meaning of
section 105(a). Thus, section 105(a) applies to the lump-sum
payment of $135,000 as well as to the monthly payments totaling
$15,646.
The fact that section 105(a) applies does not necessarily
mean that the amounts are included in income. As section 105(a)
itself indicates, there are exceptions. The relevant exception
for the instant case appears in section 105(c), which provides as
follows:
Gross income does not include amounts referred to in
subsection (a) to the extent such amounts--
(1) constitute payment for the permanent loss
or loss of use of a member or function of the
body, or the permanent disfigurement, of the
taxpayer * * *, and
(2) are computed with reference to the nature
of the injury without regard to the period the
employee is absent from work.
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