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Looking beyond the settlement agreement, we likewise find no
indication that Onyx intended the $41,651.81 to compensate
petitioner for physical injury. As mentioned supra, the
complaint that petitioner filed in State court alleges sexual and
racial harassment, failure to take reasonable steps to prevent
and correct harassment, and retaliation, and the prayer for
relief requests compensatory damages, mental and emotional
distress damages, punitive damages, interest, attorney’s fees,
and costs incurred. The complaint says nothing about physical
injury or physical sickness sustained by petitioner. There is
nothing in the record linking the settlement proceeds to any
physical injury or sickness. Accordingly, respondent’s
determination on this issue is sustained. Based on our
resolution of this issue, we do not address whether the
underlying cause of the State court action was based upon tort or
tort type rights. See Allum v. Commissioner, supra.
II. Accuracy-Related Penalty Under Section 6662(a)
Section 6662(a) provides that a taxpayer may be liable for a
penalty of 20 percent of the portion of an underpayment of tax
attributable to negligence or disregard of rules or regulations.
Sec. 6662(a) and (b)(1). The term “negligence” includes any
failure to make a reasonable attempt to comply with the
provisions of the Internal Revenue Code. Sec. 6662(c). The term
“disregard” includes any careless, reckless, or intentional
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