-11-
States, supra at 865.
In making this determination, we must examine the terms of
the agreement. Id. at 863. In particular, we examine the
agreement language that “all Settlement Proceeds * * * [were]
paid * * * on account of personal injuries.” Petitioner contends
that this sentence irrefutably proves that part of the liquidated
damages were received on account of her personal injuries.
Petitioner further contends that under Bagley v. Commissioner,
105 T.C. 396, 406 (1995), affd. 121 F.3d 393 (8th Cir. 1997), we
must accept the terms of the parties’ agreement unless facts and
circumstances deem otherwise.
Respondent counters that liquidated damages in a FLSA
lawsuit, by their very nature, are not and cannot be on account
of personal injuries. See Overnight Motor Transp. Co. v. Missel,
supra at 583-584. Rather, liquidated damages compensate
plaintiffs for back wages and incidental costs. Id. In light of
this, respondent contends that the inclusion of this language was
a “naked attempt [by the plaintiffs] to bring the proceeds under
* * * section 104(a)(2).”
Despite petitioner’s contention that we must accept the
agreement’s terms, we cannot blindly accept labels which parties
attach to transactions. See Robinson v. Commissioner, 102 T.C.
116 (1994), affd. in part, revd. in part 70 F.3d 34 (5th Cir.
1995); Peaco v. Commissioner, T.C. Memo. 2000-122. More
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