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allocate proceeds to specific claims and there is no evidence
that a specific claim was meant to be singled out, we consider
the entire amount taxable. See Morabito v. Commissioner, T.C.
Memo. 1997-315.
In Commissioner v. Schleier, 515 U.S. 323 (1995), the
Supreme Court cautioned that there must be a direct link between
the personal injury and the recovery of damages for the exclusion
in section 104(a)(2) to apply. In the present case, petitioner
has not shown that her claim for mental anguish prompted, to any
discernible extent, the settlement proceeds that she received.
In agreeing to settle petitioner’s civil action, Liberty
Life appears to have been highly motivated by the possibility of
an award of punitive damages. Significantly, the release did not
specifically allocate any amount as compensation for personal
injury or sickness. Further, petitioner has not adduced any
facts upon which she would rely to prove such an allocation.
Under these circumstances, we are unable to find that a specific
portion of the settlement was intended to satisfy any potential
claim for mental anguish that petitioner might have had. See,
e.g., Ramos v. Davis & Geck, Inc., 224 F.3d 30 (1st Cir. 2000).
As a result, the entire payment is presumptively includable in
gross income. See Taggi v. United States, 35 F.3d 93, 96 (2d
Cir. 1994).
In conclusion, petitioner’s amended complaint and the
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