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In Robinson v. Commissioner, 102 T.C. at 123-124, the
parties entered into a settlement agreement that did not contain
an allocation, but they included an allocation in the final
judgment. The judge approved the judgment which allocated 95
percent of the settlement amount to a personal injury claim
solely to minimize the tax liability. This Court refused to
accept the allocation in the final judgment stating:
Petitioners therefore desired, and were given, the
unfettered discretion to allocate the settlement
proceeds in any manner they desired in order to
minimize their Federal income tax liability. We find
that petitioners deliberately and unilaterally arrived
at the allocations contained in the final judgment
solely with a view to Federal income taxes, and not to
reflect the realities of their settlement. [Id. at
129.]
In Robinson, the Court concluded that the defendant did not
intend to settle one claim to the exclusion of another.
Similarly, in this case, the defendants solely intended to
dispose of the case and secure their proprietary interests, and
they did not object to petitioner’s attempt to structure the
settlement to satisfy his tax goals. The defendants’ counsel
testified that how petitioner structured the pleadings was his
“problem” once the settlement amount was agreed to and the
proprietary interests were secure.
As to petitioner’s belated claim for personal physical
injury, the “courts have not looked with favor upon retroactive
revisions of written instruments * * * as a ground for
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Last modified: May 25, 2011