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generally made by reference to the settlement agreement in light
of the facts and circumstances surrounding it. Key to this
determination is the "intent of the payor" in making the payment.
Knuckles v. Commissioner, 349 F.2d 610, 613 (10th Cir. 1965),
affg. T.C. Memo. 1964-33; Agar v. Commissioner, 290 F.2d 283, 284
(2d Cir. 1961), affg. per curiam T.C. Memo. 1960-21; Seay v.
Commissioner, 58 T.C. 32, 37 (1972). We must ask ourselves: "In
lieu of what was the payment received?" See Robinson v.
Commissioner, 102 T.C. 116, 126-127 (1994), affd. in part, revd.
in part on an issue not relevant herein and remanded 70 F.3d 34
(5th Cir. 1995). Although the payee's belief is relevant to this
inquiry, the payment's ultimate character depends on the payor's
dominant reason for making the payment. Commissioner v.
Duberstein, 363 U.S. 278, 286 (1960); see Agar v. Commissioner,
supra at 298; Fono v. Commissioner, 79 T.C. 680 (1982), affd.
without published opinion 749 F.2d 37 (9th Cir. 1984).
The settlement agreement indicates that Mr. Kent paid the
disputed amount to petitioner in surrender of her rights in most
of the property purchased during their relationship.5 Respondent
agrees with this characterization, but extrapolates therefrom
that Mr. Kent paid petitioner the disputed amount to compensate
5 We recognize that KENCOR paid petitioner the $22,000
amount and that KENCOR issued petitioner a Form 1099-MISC
reporting that the amount was paid as miscellaneous income. The
record, however, tends to disprove such a characterization. The
more likely explanation of the payment, and the one we find from
the facts herein, is that Mr. Kent, as principal shareholder of
KENCOR, caused KENCOR to pay petitioner the $22,000 amount on his
behalf.
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