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settlement represented damages to him for a racial discrimination
claim he had against PayLess, and the Settlement Agreement was
broad enough to include such claim. Petitioner contends that
throughout the period he was employed by PayLess, from 1986 to
1993, he was subjected to racial discrimination, which he
discussed with his superiors at PayLess. Petitioner alleges
that, although no suit was filed by petitioner against PayLess
(including one for racial discrimination), petitioner discussed
the matter with the attorneys representing plaintiffs in the
class action. However, no action was taken by these attorneys to
assert a racial discrimination claim in the class action, and
there is no evidence that the matter was ever taken up with the
opposing attorneys who represented PayLess. Nevertheless,
petitioner contends that the proceeds from the class settlement
constituted damages for personal injuries; i.e., resulting from
racial discrimination practices by PayLess, relying on Rev. Rul.
1993-88, 1993-2 C.B. 61;3 Metzger v. Commissioner, 88 T.C. 834
(1987), affd. 845 F.2d 1013 (3d Cir. 1988); Morabito v.
3 Rev. Rul. 93-88, 1993-2 C.B. 61, provides that
compensatory damages, including back pay, received in
satisfaction of a claim of racial discrimination under 42 U.S.C.
sec. 1981 and Title VII of the Civil Rights Act of 1964 are
excludable from gross income as damages for personal injury under
sec. 104(a)(2). In Rev. Rul. 96-65, 1996-2 C.B. 6, Rev. Rul. 93-
88 was declared obsolete prospectively from June 14, 1995.
Petitioner's payment was received by him prior to June 14, 1995.
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