- 6 - “[W]here an amount is paid in settlement of a case, the critical question is, in lieu of what was the settlement amount paid”. Bagley v. Commissioner, 105 T.C. 396, 406 (1995), affd. 121 F.3d 393 (8th Cir. 1997). An important factor in determining the validity of the agreement is the “intent of the payor” in making the payment. Knuckles v. Commissioner, 349 F.2d 610, 613 (10th Cir. 1965), affg. T.C. Memo. 1964-33. If the payor’s intent cannot be clearly discerned from the settlement agreement, the intent of the payor must be determined from all the facts and circumstances of the case, including the complaint filed and details surrounding the litigation. Robinson v. Commissioner, supra at 127.3 In Laber v. Commissioner, T.C. Memo. 1997-559, the taxpayer filed eight EEOC complaints against his former employer. The settlement agreement did not allocate the damage award, nor did the taxpayer allege in any of the eight complaints personal injury or sickness that occurred as a result of the alleged discrimination. We held the settlement award was not excludable under section 104(a)(2). Id. Similarly, petitioner did not allege physical injury or sickness in her complaints filed with the EEOC. Petitioner, however, argues that the $71,600 damage award represented 3 Sec. 7491(a), concerning burden of proof, has no bearing on the underlying substantive issue. Respondent has satisfied the burden of production with respect to the accuracy-related penalty under sec. 6662. See sec. 7491(c).Page: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011