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from the termination of their professional relationships with
Maritz Inc.8
Even if we were to assume, however, for sake of argument,
that by using the term “personal damages” the parties to the
settlement agreement meant to expressly allocate the settlement
proceeds exclusively to tort type personal injuries, we still
would not find such an allocation dispositive here, for the
reasons described below.
An express allocation in a settlement agreement will
generally be followed if the parties have entered into the
agreement “in an adversarial context at arm’s length and in good
faith”; such an express allocation is not necessarily
determinative, however, “if other facts indicate that the payment
was intended by the parties to be for a different purpose.”
Bagley v. Commissioner, 105 T.C. at 406. Absent an express
allocation in the settlement agreement, the most important
consideration is the payor’s intent in making the payment.
Metzger v. Commissioner, 88 T.C. 834, 847-848 (1987), affd.
without published opinion 845 F.2d 1013 (3d Cir. 1988).
8 Sec. 11.03 of the settlement agreement provides that “Upon
receipt of the sum of $750,000 to be paid by Maritz * * * to the
Persons and in the amounts set forth on Schedule III hereto”, the
parties will release and discharge “all manner of claims * * * in
connection with or based on any facts, causes, matters or things
existing from the beginning of the world”, including “all causes,
matters or things arising out of or in connection with” the
termination of Katherine’s and Damian’s professional
relationships with Maritz Inc.
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