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121 F.3d 393 (8th Cir. 1997). An important factor in determining
the purpose of the payment is the “intent of the payor”.
Knuckles v. Commissioner, 349 F.2d 610, 613 (10th Cir. 1965),
affg. T.C. Memo. 1964-33. If the payor’s intent cannot be
clearly discerned from the settlement agreement, the intent of
the payor must be determined from all the facts and circumstances
of the case, including the complaint filed and details
surrounding the litigation. Robinson v. Commissioner, supra at
127.
The agreement that petitioner and Regions entered into
states: “In consideration of the promises made herein by Pates,
Employer agrees that it will pay to Pates and her attorney * * *
($90,000) for attorney’s fees and compensatory damages for
emotional distress under Title VII of the Civil Rights Act of
1964, as amended”. The Agreement is dated November 27, 2001, and
was signed by all parties.
Under section 104(a)(2), as amended and in effect for 2001,
the mediation agreement pursuant to which the $54,000 (excluding
attorney’s fees) was paid to petitioner clearly was not a
settlement for personal physical injuries or physical sickness
but was specifically for emotional stress she sustained due to
racial discrimination. Additionally, no portion of the
settlement included payment for any medical expenses petitioner
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