Christina Connolly - Page 10




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          statement that the agreement included the settlement of all                 
          claims without specific allocation to any particular claim,                 
          demonstrated that its dominant reason for the payment was not as            
          damages on account of physical injury or physical sickness.                 
               From the evidence in the record, the Court finds that the              
          settlement amounts were not paid “on account of personal injuries           
          or sickness”, see Commissioner v. Schleier, 515 U.S. at 337, and            
          are not excludable from gross income under section 104(a)(2).               
               Respondent’s determination that the settlement payment is              
          includable in petitioner’s income for 2002 is sustained.                    
          Penalties and Additions to Tax                                              
               Section 7491(c) imposes on the Commissioner the burden of              
          production in any court proceeding with respect to the liability            
          of any individual for penalties and additions to tax.  Higbee v.            
          Commissioner, 116 T.C. 438, 446 (2001); Trowbridge v.                       
          Commissioner, T.C. Memo. 2003-164, affd. 378 F.3d 432 (5th Cir.             
          2004).  In order to meet the burden of production under section             
          7491(c), the Commissioner need only make a prima facie case that            
          imposition of the penalty or the addition to tax is appropriate.            
          Higbee v. Commissioner, supra.                                              
               Addition to Tax Under Section 6651(a)(1)                               
               Once the Commissioner meets his burden of production                   
          regarding the addition to tax, the burden of proof remains on the           
          taxpayer, who must prove that the failure to file was:  (1) Due             







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Last modified: November 10, 2007