Reginald James Smith - Page 7




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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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