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where it appears that one party may not have had a strong
motivation to negotiate at arm’s length as to the
characterization and/or division of the settlement amounts.
Hemelt v. United States, 122 F.3d 204, 208 (4th Cir. 1997);
Dotson v. United States, 87 F.3d 682, 687 (5th Cir. 1996);
Robinson v. Commissioner, supra at 127; Threlkeld v.
Commissioner, 87 T.C. 1294, 1306-1307 (1986), affd. 848 F.2d 81
(6th Cir. 1988); Fono v. Commissioner, 79 T.C. 680, 694 (1982),
affd. without published opinion 749 F.2d 37 (9th Cir. 1984); see
also Mitchell v. Commissioner, T.C. Memo. 1990-617, affd. without
published opinion 992 F.2d 1219 (9th Cir. 1993). Our ultimate
inquiry as to the character of a payment rests on the payor’s
intent or dominant reason for making the payment. Knuckles v.
Commissioner, 349 F.2d 610, 613 (10th Cir. 1965), affg. T.C.
Memo. 1964-33; Agar v. Commissioner, 290 F.2d 283, 284 (2d Cir.
1961), affg. per curiam T.C. Memo. 1960-21; Metzger v.
Commissioner, 88 T.C. 834, 847 (1987), affd. without published
opinion 845 F.2d 1013 (3d Cir. 1988). For a payment to be
excluded from gross income under section 104(a)(2), the payor
must have intended to recompense the payee for a claim arising
out of “personal physical injuries” or “physical sickness”; we
may rely on the jury’s verdict as the best evidence in
determining a payor’s intent for purposes of section 104(a)(2).
See United States v. Burke, 504 U.S. 229, 234 (1992); Miller v.
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