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income. We have held that where the evidence did not provide a
basis for determining an allocation of a settlement payment
between claimed damages for lost profit and for lost capital, the
taxpayer has not met his burden of proving a recovery of capital.
See Aluminum & Metal Serv., Inc. v. Commissioner, T.C. Memo.
1965-129, affd. 358 F.2d 138 (7th Cir. 1966). Petitioner has not
shown what portion, if any, of the settlement payments from
Marine Builders, Inc., was for lost value and not lost income.
We accordingly sustain respondent’s determination that they were
taxable income.
Darling Yachts, Inc.
Petitioner received payments from Darling Yachts, Inc., in
1996 and 1997 and did not report those payments as income. As
with the Marine Builders, Inc., settlement, petitioner argues
that the Darling Yachts, Inc., payments were a return of capital.
In the Darling Yachts, Inc., complaint, petitioner sought damages
for breach of warranty, failure to complete the vessel, and loss
of income. The agreed judgment settling the matter does not
indicate the purpose or nature of the settlement payments.
Petitioner has not shown what portion, if any, of the settlement
payments he received from Darling Yachts, Inc., was attributable
to damages for lost value or lost profits from its failure to
complete the vessel. Accordingly, we conclude that petitioner
has failed to meet his burden of proof that there was a return of
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