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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