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In Fabry, the question was whether a $500,000 payment the
taxpayers received for damage to their business reputation in
settlement of a tort action was excludable from gross income as
damages received “on account of personal injuries or sickness”
within the meaning of section 104(a)(2). The Court of Appeals
stated that the IRS had stipulated that the $500,000 payment was
properly allocable as damage to the Fabrys’ business reputation.
Id. at 1268. The Court of Appeals found on the basis of the
“unique facts” presented that the Fabrys’ business was so much a
part of their persona that “Their business reputation was their
personal reputation.” Id. at 1270. The Court of Appeals found
that the Fabrys had suffered “distress, humiliation and mental
anguish * * * through the loss of their good name”. Id.
Accordingly, the Court of Appeals concluded that the $500,000 the
Fabrys received on account of injuries to their business
reputation was received on account of personal injuries and thus
was excludable from gross income under section 104(a)(2).
In the instant case, by contrast, the parties have not
stipulated that any part of the jury awards that petitioner
received is properly allocable to damage to his reputation or to
any other particular type of injury, personal or otherwise.
Petitioners bear the burden of proof. See Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933); Feldman v.
Commissioner, 20 F.3d 1128, 1132 (11th Cir. 1994) (the
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Last modified: May 25, 2011