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as damage to the Fabry’s business reputation”,3 id. at 1268-1269,
and that the case presented a single question of law, i.e.,
whether the $500,000 of damages that du Pont paid to the Fabrys
for injury to their business reputation was a payment received on
account of personal injuries within the meaning of section
104(a)(2), see id. The Court of Appeals found our facts and
circumstances approach to that question in Fabry I to be insuffi-
cient. See id. at 1269. The Court of Appeals stated: “Its [the
Tax Court’s] method of merely perusing the record, looking for
the presence of the magic words, ‘personal injury,’ either in the
complaint, the release, mediation correspondence or settlement
documents is incorrect.” Id.
In deciding Fabry II, the Court of Appeals examined intangi-
ble injuries such as injury to business reputation in light of
3In this regard, the Court of Appeals noted:
At trial, the IRS stipulated that: (1) du Pont
was aware from the beginning that the Fabrys’ claim
included a claim for damage to their business reputa-
tion; (2) that throughout settlement discussions the
Fabrys had steadfastly presented a $500,000 claim for
damage to their business reputation; (3) that du Pont
never disputed the Fabrys’ claim for business reputa-
tion damage throughout the mediation; (4) that du Pont
sought and obtained a release specifically with respect
to the business reputation claim; and (5) that du Pont
would not have settled the case without a release of
the claim for damage to the Fabrys’ business reputa-
tion.
Fabry v. Commissioner, 223 F.3d 1261, 1268-1269 n.21 (11th Cir.
2000), revg. 111 T.C. 305 (1998).
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