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specific amount allocable to personal injury tort damages, rather
than severance pay, the entire payment was presumed taxable. See
id.
In Sherman v. Commissioner, T.C. Memo. 1999-202, the
taxpayer initially refused to participate in IBM’s severance
program and threatened to enjoin the downsizing terminations on
the basis of age discrimination. He had also previously filed
unfair labor practice charges and internal complaints against
supervisors. See id. He alleged that his treatment by IBM had
resulted in physical and mental injury. See id. Through
negotiations, he and IBM reached a settlement which involved a
payment in excess of what would have been received under the
severance program and a general release of “all claims”. Id.
A nonexclusive, “including but not limited to”, enumeration
followed “all claims” and reflected, among other things, the
particular complaints made by the taxpayer. Id.
Faced with the above-described facts, the Court, while
acknowledging that “It is apparent to us that IBM viewed
petitioner as litigious”, nonetheless concluded “IBM did not
intend for any portion of the $207,000 to be specifically carved
out as a settlement of a tort or tort type claim on account of a
personal injury or sickness.” Id. In reaching this conclusion,
the Court again gave primary emphasis to the all-encompassing
nature of the release:
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