- 13 - not intend to pay the settlement amount at issue in order to compensate petitioner for his physical injuries. On the instant record, we reject respondent’s position. With respect to respondent’s contentions that petitioner has failed to introduce evidence regarding, and that Mr. Rodman was skeptical about, the extent of petitioner’s physical injuries as a result of the incident, those contentions appear to ignore the well-established principle under section 104(a)(2) that it is the nature and character of the claim settled, and not its validity, that determines whether the settlement payment is excludable from gross income under section 104(a)(2). See Bent v. Commissioner, supra; Glynn v. Commissioner, supra; Seay v. Commissioner, supra. In any event, we find below that the record establishes that Mr. Rodman’s dominant reason in paying the settlement amount at issue was petitioner’s claimed physical injuries as a result of the incident. With respect to respondent’s contention that Mr. Rodman did not intend to pay the settlement amount at issue in order to compensate petitioner for his physical injuries because the amount of liquidated damages (i.e., $200,000) payable by peti- tioner to Mr. Rodman under the settlement agreement was equal to the settlement amount (i.e., $200,000) paid to petitioner under that agreement, we do not find the amount of liquidated damages payable under the settlement agreement to be determinative of thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011