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tort-type rights, and (2) the proceeds were received on account
of “personal physical injuries” or “physical sickness”. See
Commissioner v. Schleier, supra at 333-334 (analyzing section
104(a)(2) before its amendment in 1996); Robinson v.
Commissioner, 102 T.C. 116 (1994), affd. in part and revd. in
part on an issue not relevant herein 70 F.3d 34 (5th Cir. 1995);
Shaltz v. Commissioner, T.C. Memo. 2003-173. We focus on the
second requirement and ask ourselves whether petitioner’s $25,000
settlement was received on account of “personal physical
injuries” or “physical sickness”. In this context, the terms
“physical injury” and “physical sickness” do not include
emotional distress, except to the extent of damages not in excess
of the amount paid for medical care described in section
213(d)(1)(A) and (B) attributable to emotional distress. See
sec. 104(a) (flush language).
We determine the reason for the settlement payment by
ascertaining the intent of the payor in making the payment. See
Robinson v. Commissioner, supra at 127. We make that
determination by analyzing all relevant facts and circumstances.
See id.; see also Shaltz v. Commissioner, supra. We conclude
from our analysis that petitioner never sought in the lawsuit a
recovery of damages for “personal physical injuries” or “physical
sickness” and, most importantly, that Alameda did not pay the
$25,000 to petitioner with any intent to settle a claim of hers
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