Madeline A. Coblenz and William J. Mason - Page 16

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          settlement agreement are excludable under section 104(a)(2), we             
          look to the written terms of the settlement agreement to                    
          determine the origin and allocation of the settlement proceeds.             
          See Metzger v. Commissioner, 88 T.C. 834 (1987), affd. without              
          published opinion 845 F.2d 1013 (3d Cir. 1988); Jacobs v.                   
          Commissioner, T.C. Memo. 2000-59.  If the language in the                   
          settlement agreement is unclear about the claim subject to                  
          settlement or if the settlement agreement does not provide for              
          any allocations, we must look to “‘the intent of the payor’ as to           
          the purpose in making the payment.”  Metzger v. Commissioner,               
          supra at 847-848; see also Robinson v. Commissioner, 102 T.C.               
          116, 127 (1994), affd. in part, revd. in part and remanded on               
          another issue 70 F.3d 34 (5th Cir. 1995).  We analyze the nature            
          of the claim that was the basis for settlement, not the validity            
          of the claim.  See United States v. Burke, supra at 237; Fabry v.           
          Commissioner, 111 T.C. 305 (1998).  We ask ourselves “in lieu of            
          what was the settlement amount paid?”  Bagley v. Commissioner,              
          105 T.C. 396, 406 (1995), affd. 121 F.3d 393 (8th Cir. 1997).               
          This involves a factual inquiry.  See Fabry v. Commissioner,                
               In the instant case, the litigants disagree as to the nature           
          of the claim that was the actual basis for the final settlement             
          agreement.  Petitioners contend that petitioner alleged various             
          causes of actions in his lawsuit against the FDIC which are                 

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