Emanoil and Magdalena Gantea - Page 8

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          The settlement agreement did not allocate the award to any                  
          specific type of damages.  The settlement agreement referenced              
          the three claims alleged by petitioner in the complaint, and                
          petitioner alleged that he suffered “extreme humiliation”,                  
          “embarrassment”, and “severe emotional distress” as a result of             
          Dana’s conduct.                                                             
               The flush language of section 104(a) provides that “For                
          purposes of paragraph (2), emotional distress shall not be                  
          treated as a physical injury or physical sickness.”  Assuming               
          petitioner did receive damages for his emotional distress,                  
          humiliation, and embarrassment, that award would not be                     
          excludable under section 104(a)(2).  As to his argument that he             
          received the award on account of personal physical injury, not              
          only is this argument precluded by the stipulation of facts and             
          the settlement agreement, but petitioner failed to provide any              
          documentary or testimonial evidence that Dana compensated him,              
          through the settlement award, for such an injury.4                          
               We need not address whether “the underlying cause of action            
          giving rise to the recovery * * * [was] ‘based upon tort or tort            
          type rights’”, Commissioner v. Schleier, supra at 337, as we find           
          that the settlement proceeds were not based on personal physical            
          injuries or sickness.  We hold that the $30,211.66 damage award             
          is not excludable under section 104(a)(2).                                  


               4  Sec. 7491(a), concerning burden of proof, has no bearing            
          on the underlying substantive issue.                                        





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