Wade H. Griffin, III - Page 12




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          Cir. 1997); McKay v. Commissioner, 102 T.C. 465, 482 (1994).  For           
          the taxable year under consideration, personal injuries included            
          both physical and nonphysical injuries.  See Commissioner v.                
          Schleier, supra at 329 n.4.                                                 
               The Supreme Court has held that taxpayers may exclude                  
          damages received if the underlying cause of action giving rise to           
          the recovery is based upon tort or tort type rights, and the                
          damages are received on account of personal injuries or sickness.           
          See id. at 336-337.                                                         
               Petitioner’s arguments are summarized as follows:  (1) The             
          claim for which the settlement was received generally sounded in            
          tort; (2) petitioner has shown that he suffered mental and/or               
          physical ailments in connection with actions of the defendants;             
          and (3) under the law of the State of Alabama, petitioner’s                 
          claims, although generally or broadly stated as founded upon                
          commercial harm, could have included petitioner’s mental                    
          suffering, and therefore the settlement is excludable under                 
          section 104(a)(2).                                                          
               Conversely, respondent’s arguments are summarized as                   
          follows:  (1) The defendants’ actions and/or petitioner’s mental            
          anguish is irrelevant because petitioner’s pleadings were based             
          on a mixture of tort, tort type, and nontort claims, and the                
          settlement did not distinguish between or specify any particular            
          claim; (2) petitioner’s claims and the settlement were for                  






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