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damages were received on account of tortlike personal injuries.
See Robinson v. Commissioner, supra at 126. The determination of
the nature of the claim is factual and is made by reference to
the settlement agreement in light of the surrounding
circumstances. Id. A key question to ask is: “‘In lieu of what
were the damages awarded?’” Id. (quoting Raytheon Prod. Corp. v.
Commissioner, 144 F.2d 110, 113 (1st Cir. 1944), affg. 1 T.C. 952
(1943)). An important factor in determining the validity of the
agreement is the intent of the payor. Id. at 127.
Petitioners contend that section 7491, which was added to
the Code by the Internal Revenue Service Restructuring and Reform
Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, shifts to
respondent the burden of proof of the nature of the claim.
Respondent, however, argues that petitioners have not satisfied
the statutory requirements under section 7491 because petitioners
neither cooperated with reasonable requests for information nor
presented credible evidence. See sec. 7491(a)(1) and (2)(B). In
this case, we need not decide whether petitioners have complied
with the requirements of section 7491 because the resolution of
this issue does not depend on which party has the burden of
proof. We resolve this issue on the preponderance of the
evidence in the record.
Under the terms of the termination agreement, petitioner was
awarded $2 million “in settlement of his claims for tortious
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