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petitioner) pursuant to judgments against U.S. Industries, Inc.
(USI), on claims for both fraudulent inducement to enter into a
contract and tortious interference with a business relationship,
plus prejudgment interest, are not excludable from gross income
as damages received “on account of personal injuries or sickness”
within the meaning of section 104(a)(2).1 In reaching this
conclusion, we cited Fabry v. Commissioner, 111 T.C. 305 (1998),
for the proposition that we must look to all the facts and
circumstances to determine the nature of petitioner’s claims
against USI and whether his recoveries on those claims were on
account of personal injuries or sickness.
While the instant case was pending on appeal there, the
U.S. Court of Appeals for the Eleventh Circuit reversed this
Court’s decision in Fabry, stating that the “facts and
circumstances approach” used therein was “insufficient.” Fabry
v. Commissioner, 223 F.3d 1261, 1269 (11th Cir. 2000).
Thereafter, the Court of Appeals vacated our decision in the
instant case and remanded it for further consideration in light
of its decision in Fabry, stating: “We imply no view as to the
result that should be reached on remand.”
1 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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Last modified: May 25, 2011