- 8 -
whether the damages received were due to a personal injury rather
than mere economic loss.” Dotson v. United States, supra at 685;
see also O’Gilvie v. United States, 519 U.S. 79, 83-84 (1996).
“Personal injury” includes physical injuries and nonphysical
injuries “such as those affecting emotions, reputation, or
character.” United States v. Burke, 504 U.S. 229, 235 n.6
(1992).
Whether damages received pursuant to a settlement agreement
are excludable under section 104(a)(2) depends on the nature of
the underlying claim that was the basis for settlement. Id. at
237. Determination of the nature of the claim is factual.
Bagley v. Commissioner, 105 T.C. 396 (1995), affd. 121 F.3d 393
(8th Cir. 1997). We first examine the written terms of the
settlement agreement to determine the allocation of settlement
proceeds. See Jacobs v. Commissioner, T.C. Memo. 2000-59. “The
most important fact in determining the purpose of [a settlement]
payment is ‘express language in the agreement stating that the
payment was (or was not) made on account of personal injury.’”
Byrne v. Commissioner, 90 T.C. 1000, 1007 (1988) (quoting Metzger
v. Commissioner, 88 T.C. 834, 847 (1987), affd. without published
opinion 845 F.2d 1013 (3d Cir. 1988)), revd. 883 F.2d 211 (3d
Cir. 1989); see also Beckey v. Commissioner, T.C. Memo. 1994-514.
However, an express allocation may be disregarded if the facts
and circumstances surrounding the payment indicate the payment
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011