- 29 -
we use our best judgment to allocate the settlement payments.
See Stocks v. Commissioner, 98 T.C. 1, 14 (1992); Burditt v.
Commissioner, T.C. Memo. 1999-117; Goeden v. Commissioner, T.C.
Memo. 1998-18; Noel v. Commissioner, T.C. Memo. 1997-113; see
also Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir. 1930);
Eisler v. Commissioner, 59 T.C. 634, 640-641 (1973). On the
basis of the whole record, and bearing against petitioners, who
have the burden of proof, we conclude that neither personal
injury claims nor economic injury claims predominated in the
calculus of Maritz Inc.’s reasons for making the settlement
payments, but rather that both types of claims weighed equally,
without distinction between Katherine’s and Damian’s claims.
Accordingly, we conclude and hold that one-half of Katherine’s
and Damian’s respective settlement payments are excludable from
gross income under section 104(a)(2).
12(...continued)
would not have made sense for the company to be paying many
millions of dollars to the Hoblers [for redemption of their
stock] that they could use to pursue claims in court.” He
testified that Maritz Inc. “certainly” felt there was a
possibility that Katherine and Damian would proceed to litigation
unless their claims were settled. He testified that Katherine
and Damian “were making demands, and in the overall it was just
time to get this matter behind us.” He testified that Maritz
Inc. “did settle those claims and they would not have settled
those claims if they thought they were totally worthless.” We
regard Backerman’s testimony as especially creditable given that
he was the attorney who negotiated the redemption agreement and
settlement payments on behalf of Maritz Inc. We also note that
he was called as respondent’s witness.
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011