Reginald James Smith - Page 6

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               When damages are received pursuant to a settlement                     
          agreement, the nature of the claim that was the actual basis for            
          settlement controls whether such amounts are excludable under               
          section 104(a)(2).  United States v. Burke, 504 U.S. 229, 237               
          (1992); Prasil v. Commissioner, supra.  The determination of the            
          nature of the claim is a factual inquiry and is generally made by           
          reference to the settlement agreement.  Robinson v. Commissioner,           
          102 T.C. 116, 126 (1994), affd. in part and revd. in part 70 F.3d           
          34 (5th Cir. 1995).  If the settlement agreement lacks express              
          language stating what the settlement amount was paid to settle,             
          we look to the intent of the payor, based on all the facts and              
          circumstances of the case, including the complaint that was filed           
          and the details surrounding the litigation.  Knuckles v.                    
          Commissioner, 349 F.2d 610, 613 (10th Cir. 1965), affg. T.C.                
          Memo. 1964-33; Allum v. Commissioner, supra.                                
               Here, the settlement agreement provides that Onyx will pay             
          petitioner $41,651.81 in exchange for petitioner’s release and              
          discharge of all claims against Onyx.  The settlement agreement             
          does not mention any physical injury or sickness.  It refers                
          generally to “all issues and claims” surrounding petitioner’s               
          employment at Onyx, and releases Onyx from “all claims, rights,             
          demands, actions, obligations, and causes of action of any and              
          every kind, known or unknown” by petitioner.                                

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