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agreement from which we cannot clearly discern why the payments
were made, the underlying complaint is normally examined as an
indicator of the payor’s intent). Petitioner alleges in his
complaint that his civil rights were violated because his
procedural and substantive due process rights were infringed. In
essence, he claims his due process rights were violated through
judicial misconduct done in furtherance of Nevada’s “good ole
boy” network. Although the complaint also includes general
allegations that he suffered emotional and physical damage as a
result of the alleged violations and seeks compensatory and
punitive damages, it contains no specific allegations of personal
physical injury or physical sickness.10
Neither the settlement agreement nor the complaint
establishes that the bank made any portion of the settlement
payment to petitioner on account of a personal physical injury or
physical sickness. The agreement and complaint only indicate
that the bank made the payment on account of civil rights
violations and for a general release from all of petitioner’s
claims.
10The mere mention of “personal physical injury” in a
complaint does not, by itself, serve to exclude the recovery from
gross income under sec. 104(a)(2) because the “personal physical
injury” language could easily be included in every complaint,
even if such claim were only a “throwaway” claim. See
Kightlinger v. Commissioner, T.C. Memo. 1998-357.
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