Nancy J. Vincent - Page 10

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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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