- 17 - 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 couldPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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