John W. Banks, III - Page 12




                                       - 12 -                                         
          Welch v. Helvering, 290 U.S. 111, 115 (1933); Robinson v.                   
          Commissioner, 102 T.C. 116, 124 (1994), affd. in part, revd. in             
          part on an issue not relevant herein and remanded 70 F.3d 34 (5th           
          Cir. 1995).                                                                 
               For 1990, section 104(a)(2) excludes from gross income “the            
          amount of any damages received (whether by suit or agreement and            
          whether as lump sums or as periodic payments) on account of                 
          personal injuries or sickness”.  Damage recoveries fall within              
          this provision to the extent that:  (1) The cause of action                 
          giving rise to the damages is based upon tort or tort type rights           
          and (2) the damages are received on account of personal injuries            
          or sickness.  See Commissioner v. Schleier, 515 U.S. 323, 336-337           
          (1995).  For the taxable year under consideration, personal                 
          injuries included both physical and nonphysical injuries.  See              
          id. at 329 n.4.                                                             
               The nature of the claim underlying a damage award, rather              
          than the validity of the claim, determines whether damages meet             
          the two-part Schleier test.  See United States v. Burke, 504 U.S.           
          229, 237 (1992); Robinson v. Commissioner, supra at 125-126.                
          Ascertaining the nature of the claim is a factual determination             
          that is generally made by reference to the settlement agreement,            
          in light of the facts and circumstances surrounding it.  Key to             
          this determination is the "intent of the payor" in making the               
          payment.  Knuckles v. Commissioner, 349 F.2d 610, 613 (10th Cir.            






Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011