- 13 -
1965), affg. T.C. Memo. 1964-33; Agar v. Commissioner, 290 F.2d
283, 284 (2d Cir. 1961), affg. per curiam T.C. Memo. 1960-21;
Seay v. Commissioner, 58 T.C. 32, 37 (1972). We ask ourselves:
"In lieu of what were the damages awarded?" See Robinson v.
Commissioner, supra at 126, and the cases cited therein.
Although the payee's belief is relevant to this inquiry, the
ultimate character of the payment rests on the payor's dominant
reason for making the payment. See Agar v. Commissioner, 290
F.2d at 284; Fono v. Commissioner, 79 T.C. 680 (1982), affd.
without opinion 749 F.2d 37 (9th Cir. 1984). A payor's intent
may sometimes be found in the characterization of the payment in
a settlement agreement, but such a characterization is not always
dispositive. Such a characterization is not dispositive, for
example, when the record proves the characterization was not the
product of bona fide adversarial negotiations. See Bagley v.
Commissioner, 105 T.C. 396, 406 (1995); Robinson v. Commissioner,
supra; Threlkeld v. Commissioner, 87 T.C. 1294, 1306-1307 (1986),
affd. 848 F.2d 81 (6th Cir.1988); see also Knuckles v.
Commissioner, supra at 613; Eisler v. Commissioner, 59 T.C. 634,
640 (1973).
Following his abandonment in the District Court of his State
law tort claims, petitioner’s causes of action in the Banks cases
were limited to alleged violations under title VII and 42 U.S.C.
secs. 1981 and 1983 (1986). Petitioner settled those claims
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