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determining tax liabilities.” Fono v. Commissioner, supra at
695. The allocation in this case is indistinguishable from
numerous cases denying such retroactive tax planning. See
Robinson v. Commissioner, supra at 133-134; Banks v.
Commissioner, T.C. Memo. 2001-48; Burditt v. Commissioner, T.C.
Memo. 1999-117. When the allocation language sought by a
taxpayer is entirely tax motivated and does not reflect the
economic realities of the settlement, the Court refuses to accept
the characterization made by only one of the parties to the suit.
Based on the record, we cannot hold that the settlement
amount or any part of it was paid on account of personal injury.
The record compels the conclusion that the reference to personal
injuries in the settlement documents was an afterthought, solely
in anticipation of tax benefits, and did not reflect the nature
of the claim by petitioner against ProGuard. We therefore hold
that the entire settlement amount is includable in petitioners’
gross income.
Self-Employment Tax
Respondent contends that the entire settlement amount,
including the cancellation of indebtedness, is subject to self-
employment tax under section 1401 because the amount received was
compensation for services under petitioner’s employment contract.
Respondent claims that the defendants could have paid to
petitioner an increased cash amount, with which petitioner could
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