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in an agreement will be respected to the extent the settlement
agreement is entered into in an adversarial context, at arm’s
length, and in good faith. See, e.g., Fono v. Commissioner, 79 T.C.
680, 694 (1982), affd. without published opinion 749 F.2d 37 (9th
Cir. 1984); Srivastava v. Commissioner, T.C. Memo. 1998-362. “If the
settlement agreement lacks express language stating that the payment
was (or was not) made on account of personal injury, then the most
important fact in determining how section 104(a)(2) is to be applied
is ‘the intent of the payor’ as to the purpose in making the
payment.” Metzger v. Commissioner, 88 T.C. 834, 847 (1987), affd.
without published opinion 845 F.2d 1013 (3d Cir. 1988).
Here, paragraph 3 of the agreement provides that the $750,000
petitioner is to receive from Millipore constitutes “damages for
personal injury allegedly suffered by Mr. Massot on account of
termination without cause by Millipore Corporation and Millipore,
S.A., damaged reputation and emotional distress caused by Millipore
Corporation”.
We are satisfied that a portion of the settlement proceeds
paid by Millipore to petitioner was to settle tort claims for
personal injury. Relying on both Massachusetts and French law, the
parties understood that petitioner had colorable and bona fide
causes of action based on tort or tort type rights (such as
defamation, invasion of privacy, libel, outrageous dismissal,
intentional or negligent infliction of emotional distress, and
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