DeForest and Rose M. Dorroh - Page 9

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               Where amounts are received pursuant to a settlement                    
          agreement, the nature of the claim that was the actual basis for            
          settlement controls whether such amounts are excludable under               
          section 104(a)(2).  United States v. Burke, 504 U.S. 229, 237               
          (1992).  Determination of the nature of the claim is a factual              
          inquiry and is generally made by reference to the settlement                
          agreement.  Robinson v. Commissioner, 102 T.C. 116, 126 (1994),             
          affd. in part and revd. in part 70 F.3d 34 (5th Cir. 1995).                 
          "[W]here an amount is paid in settlement of a case, the critical            
          question is, in lieu of what was the settlement amount paid".               
          Bagley v. Commissioner, 105 T.C. 396, 406 (1995), affd. 121 F.3d            
          393 (8th Cir. 1997).  An important factor in determining the                
          validity of the agreement is the "intent of the payor" in making            
          the payment.  Knuckles v. Commissioner, 349 F.2d 610, 613 (10th             
          Cir. 1965), affg. T.C. Memo. 1964-33.  If the payor's intent                
          cannot be clearly discerned from the settlement agreement, the              
          intent of the payor must be determined from all the facts and               
          circumstances of the case, including the complaint filed and                
          details surrounding the litigation.  Robinson v. Commissioner,              
          supra at 127.                                                               
               Although the taxpayer must show that the damages were                  
          received "on account of personal injuries or sickness" under the            
          second requirement of Commissioner v. Schleier, supra, subsequent           







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