-8-
injuries or physical sickness. Commissioner v. Schleier, supra
at 337; sec. 1.104-1(c), Income Tax Regs. This reformulation of
the two-part test set forth in Schleier incorporates the
amendment to section 104(a)(2) pursuant to the Small Business Job
Protection Act of 1996, Pub. L. 104-188, sec. 1605, 110 Stat.
1838, (the SBJPA amendment), narrowing the exclusion formerly
applying to personal injury damages to those that are physical in
nature. Besides the imposition of this additional prerequisite
into the second prong, the applicable analysis is not otherwise
altered by the SBJPA amendment. Shaltz v. Commissioner, T.C.
Memo. 2003-173; Prasil v. Commissioner, T.C. Memo. 2003-100.
The determination as to whether damages received pursuant to
a settlement fall within the purview of the conjunctive two-prong
test is a factual one. Robinson v. Commissioner, 102 T.C. 116,
126 (1994), affd. in part, revd. in part, and remanded on another
issue 70 F.3d 34 (5th Cir. 1995). Extending beyond the “four
corners” of the settlement documentation, the pertinent analysis
entails a consideration of extrinsic factors informative of the
nature of the underlying claims discharged by the settlement.
Id.; see also Bagley v. Commissioner, 105 T.C. 396, 406 (1995)
(“The critical question is, in lieu of what was the settlement
paid[?]”), affd. 121 F.3d 393 (8th Cir. 1997); Threlkeld v.
Commissioner, 87 T.C. 1294, 1306 (1986), affd. 848 F.2d 81 (6th
Cir. 1988). Relevant extrinsic factors include the details
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