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Here, the Settlement Term Sheet contained a very general
reference to petitioner’s claims against Ormet:31 “in settlement
of [Mr. Bradley’s] direct claims against Ormet”. It failed to
make even a general, much less a definitive allocation between
tort or tort-like claims excludable under section 104(a)(2) and
other claims not excludable under section 104(a)(2). Even the
“Johnny-come-lately” paragraph 3 of the Implementing Agreement
gave only very general indications as to the alleged specific
tort claims. It said: “including but not limited to those libel
and slander claims described in * * * the letter dated August 11,
1995”.
A. Express Language
Language in a settlement agreement can offer probative
evidence on how a settlement payment should be treated for
purposes of section 104(a)(2). See, e.g., Bent v. Commissioner,
87 T.C. 236, 246 (1986), affd. 835 F.2d 67 (3d Cir. 1987).
Petitioners did not provide credible evidence of an agreed-upon
amount attributable to personal injuries between petitioner and
Ormet or their respective counsel in either the Settlement Term
Sheet or the Implementing Agreement.
Petitioner’s law firm, Finn Dixon & Herling LLP, had made
petitioners aware that the absence of documentation supporting
31 See supra note 5 discussing the change of the company’s
name from Oralco to Ormet.
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