- 25 -
professional career had been damaged severely by Okabena’s
actions.
We find that Okabena made the lump-sum payments “in lieu of”
petitioner’s prosecution of his tort claims. Id.; see also sec.
1.104-1(c), Income Tax Regs. We hold, therefore, that the lump-
sum payments are excludable from petitioner’s income under
section 104(a)(2).
C. Liquidation Payment
Paragraph 5(a) of the settlement agreement clearly and
expressly states the purpose for making the liquidation payment
to petitioner: “[Okabena] will pay Gross $516,907.33 * * * as
the value of his interests in the partnerships and other
investments, except Okabena Partnership V-8 and Energy
Corporation E-2”. The carefully structured settlement agreement
does not designate the liquidation payment as compensation for
alleged personal injuries.
The liquidation payment was not made to petitioner “on
account of personal injury or sickness”; rather, petitioner
received the liquidation payment because he terminated his
employment with Okabena and liquidated his interests in Okabena
investment entities. The liquidation of petitioner’s interests
in the investment entities was prompted by the desire of
petitioner and Okabena to sever most of petitioner’s ties with
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011