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claims were contract damage claims not personal injury tort
claims.
Respondent characterizes petitioners’ arguments as self-
serving attempts to structure the settlement to minimize their
tax exposure. Respondent contends that petitioners did not
provide any evidence that the payment was actually in settlement
of Mr. Bradley’s alleged personal injuries. Instead, the $12
million may have been, in whole or in part: A payment for
contract claims; additional disguised stock purchase price;
and/or commission to Mr. Bradley for services to all stockholder
parties of the Voting Trust for maintaining the various actions
and negotiating the resolution of these matters; and to end the
then-ongoing significant litigation costs foisted upon the
parties by dint of petitioners’ litigation.
II. Burden of Proof
Where the Commissioner has determined a deficiency in tax,
the taxpayer bears the burden of proving facts that show the
determination is incorrect. Rule 142(a)(1); Welch v. Helvering,
290 U.S. 111, 115 (1933); Feldman v. Commissioner, 20 F.3d 1128,
1132 (11th Cir. 1994), affg. T.C. Memo. 1993-17. However, the
burden of proof may shift to respondent under section 7491(a).
Section 7491 applies to examinations commenced after July 22,
1998. Information document requests in the record indicate
respondent’s examination commenced on or before August 1997.
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