- 16 -
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,
supra.
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
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011