- 13 -
F.3d 34 (5th Cir. 1995); Seay v. Commissioner, 58 T.C. 32, 37
(1972). Where there is a settlement agreement, that determina-
tion is usually made by reference to it. See Knuckles v. Commis-
sioner, 349 F.2d 610, 613 (10th Cir. 1965), affg. T.C. Memo.
1964-33; Robinson v. Commissioner, supra. If the settlement
agreement lacks express language stating what the settlement
amount was paid to settle, the intent of the payor is critical to
that determination. Knuckles v. Commissioner, supra; see also
Agar v. Commissioner, 290 F.2d 283, 284 (2d Cir. 1961), affg. per
curiam T.C. Memo. 1960-21. Although the belief of the payee is
relevant to that inquiry, the character of the settlement payment
hinges ultimately on the dominant reason of the payor in making
the payment. Agar v. Commissioner, supra; Fono v. Commissioner,
79 T.C. 680, 696 (1982), affd. without published opinion 749 F.2d
37 (9th Cir. 1984). Whether the settlement payment is excludable
from gross income under section 104(a)(2) depends on the nature
and character of the claim asserted, and not upon the validity of
the claim. See Bent v. Commissioner, 87 T.C. 236, 244 (1986),
affd. 835 F.2d 67 (3d Cir. 1987); Glynn v. Commissioner, 76 T.C.
116, 119 (1981), affd. without published opinion 676 F.2d 682
(1st Cir. 1982); Seay v. Commissioner, supra.
In support of petitioner’s position that the payments at
issue are excludable from her gross income under section
104(a)(2), petitioner testified that she had “informed the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011