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determinative. The fact that personal injuries were not
mentioned in the Settlement Term Sheet supports the conclusion
that the personal injuries, or at least their dollar amount, were
contrived.
Mr. Dixon testified that he was not involved in the
settlement, nor was he aware that, as a result of the execution
of the Settlement Term Sheet, the parties had agreed to release
the Six Lawsuits prior to petitioner’s receipt of Mr. Dixon’s
August 15, 1995, letter.33 Mr. Conner testified that the
litigation among the parties pertained only to the filed suits
and not to any libel or slander suits.
After execution of the Settlement Term Sheet, petitioner
sought advice regarding treatment of part of the settlement
proceeds as nontaxable. Mr. Dixon first advised petitioner after
execution of the Settlement Term Sheet. These facts are
indicative that petitioner, Ormet, and Mr. Boyle were not
previously involved in serious discussions or negotiations
contemplating a payment for personal injuries. Petitioner’s
attempted allocation of $12 million in the Implementing Agreement
33 Judge Stamp of the United States District Court for the
Northern District of West Virginia dismissed lawsuits number one,
two, and three of the Six Lawsuits on Aug. 10, 1995, and lawsuits
number five and six of the Six Lawsuits on Aug. 11, 1995.
Lawsuit number four was resolved when Judge Stamp granted
petitioner’s petition for relief from rules 23(e) and 23.1 of the
Federal Rules of Civil Procedure with respect to formal notice
and court approval of the global settlement of the parties on
Aug. 18, 1995.
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