Alain and Monique Massot - Page 15

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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                         
                  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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