On July 31, 1992, petitioner signed the release. At the time of signing the release petitioner had no legal claims pending in either State or Federal court against IBM for unlawful employment practices. ³1997 Tax Ct. Memo LEXIS 379">*384 Petitioner, however, thought that he had a claim against IBM for infliction of emotional distress caused by his hectic employment travel schedule and pressure at work. ⁴

In exchange for signing the release and participating in the ITO II Program, petitioner received a $ 52,169 lump-sum payment (the payment or ITO payment). The payment was based on years of service and rate of pay. At the time of signing the release, petitioner attached1997 Tax Ct. Memo LEXIS 379">*385 a statement to it indicating that he was submitting the release under duress.

For the year 1992 petitioner received a Form W-2 from IBM showing wages, tips, and other compensation as $ 90,946.51. On October 13, 1993, petitioner filed his 1992 Federal income tax return. Petitioner reported the $ 90,946.51 as wages, subtracted the $ 52,169 ITO payment therefrom, and attached a disclosure statement to his return, asserting that the ITO payment is excludable from gross income pursuant to section 104(a)(2) as a payment received in exchange for the release and settlement of tort-type rights. Respondent determined that the ITO payment was fully taxable severance pay.

Discussion

Except as otherwise provided, gross income includes income from all sources. Sec. 61(a); Commissioner v. Glenshaw Glass Co., 348 U.S. 426">348 U.S. 426 (1955). While section 61(a) is to be broadly construed, statutory exclusions from income are narrowly construed. Commissioner v. Schleier, 515 U.S. 323">515 U.S. 323, 515 U.S. 323">327-328 (1995); Kovacs v. Commissioner, 100 T.C. 124">100 T.C. 124, 100 T.C. 124">128 (1993), affd. without published opinion 25 F.3d 1048">25 F.3d 1048 (6th Cir. 1994).1997 Tax Ct. Memo LEXIS 379">*386

Under section 104(a)(2), gross income does not include "the amount of any damages received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal injuries or sickness". Section 1.104-1(c), Income Tax Regs., provides:

(c) Damages received on account of personal injuries or sickness. * * * The term "damages received (whether by suit or agreement)" means an amount received * * * through prosecution of a legal suit or action based upon tort or tort type rights, or through a settlement agreement entered into in lieu of such prosecution.

Thus, an amount may be excluded from gross income only when it was received both: (1) Through prosecution or settlement of an action based upon tort or tort type rights; and (2) on account of personal injuries or sickness. 515 U.S. 323">Commissioner v. Schleier, supra;Wesson v. United States, 48 F.3d 894">48 F.3d 894, 48 F.3d 894">901-902 (5th Cir. 1995); Bagley v. Commissioner, 105 T.C. 396">105 T.C. 396, 105 T.C. 396">416 (1995).

Where damages are received pursuant to a settlement agreement, the nature of the claim that was the actual basis for settlement controls whether such1997 Tax Ct. Memo LEXIS 379">*387 damages are excludable under section 104(a)(2). United States v. Burke, 504 U.S. 229">504 U.S. 229, 504 U.S. 229">237 (1992); Thompson v. Commissioner, 866 F.2d 709">866 F.2d 709, 866 F.2d 709">711 (4th Cir. 1989), affg. 89 T.C. 632">89 T.C. 632 (1987); Robinson v. Commissioner, 102 T.C. 116">102 T.C. 116, 102 T.C. 116">126 (1994), affd. in part, revd. in part 70 F.3d 34">70 F.3d 34 (5th Cir. 1995). "The critical question is, in lieu of what was the settlement amount paid?" 105 T.C. 396">Bagley v. Commissioner, supra at 406.

Determination of the nature of the claim is factual. 105 T.C. 396">Bagley v. Commissioner, supra;Stocks v. Commissioner, 98 T.C. 1">98 T.C. 1, 98 T.C. 1">11 (1992). The first requirement is the existence of a claim based upon tort or tort type rights. 515 U.S. 323">Commissioner v. Schleier, supra at 337. The claim must be bona fide, but not necessarily "valid; i.e.," sustainable. Taggi v. United States, 35 F.3d 93">35 F.3d 93, 35 F.3d 93">96 (2d Cir. 1994); Robinson v. Commissioner, 102 T.C. 116">102 T.C. 126; 98 T.C. 1">Stocks v. Commissioner, supra at 10.1997 Tax Ct. Memo LEXIS 379">*388 In this connection, we have held that claims for potential future personal injuries do not qualify for exclusion under section 104(a). Roosevelt v. Commissioner, 43 T.C. 77">43 T.C. 77 (1964); Starrels v. Commissioner, 35 T.C. 646">35 T.C. 646 (1961), affd. 304 F.2d 574">304 F.2d 574 (9th Cir. 1962). Such holdings imply that there must be an existing claim. Moreover, while it need not have been previously asserted, the absence of any knowledge of the claim on the part of the employer-payor obviously has a negative impact in determining the requisite intent of the payment. Sodoma v. Commissioner, T.C. Memo. 1996-275; see also Keel v. Commissioner, T.C. Memo. 1997-278; Foster v. Commissioner, T.C. Memo. 1996-26.

Petitioner asserts that he had a bona fide claim against IBM for infliction of emotional distress caused by his travel schedule and pressures at work, and therefore IBM accepted petitioner's ITO II Program participation request and subsequent release in lieu of litigation. Petitioner claims that his position is supported by the fact 1997 Tax Ct. Memo LEXIS 379">*389 that he filed informal claims and/or grievances against IBM pursuant to the company's own internal programs (e.g., Open Door Policy). Respondent argues that petitioner's failure to lodge any formal tort-type claim against IBM prior to and at the time of signing the release establishes that there was no bona fide dispute between petitioner and IBM that could provide the basis for settlement.

We disagree. An employee is not always required to file a formal legal action against an employer prior to settling an existing claim in order to exclude such settlement payment from income under section 104(a)(2). Sodoma v. Commissioner, supra.Viewing the facts in the light most favorable to petitioner, it can be argued that petitioner's filing of complaints with IBM's grievance committee is at least some evidence of an existing dispute between the parties that could have provided the basis for settlement. Thus, we find, for purposes of this motion only, that petitioner has met the first prong of excludability under section 104(a)(2) in that he has established the existence of an underlying tort-type cause of action. See 515 U.S. 323">Commissioner v. Schleier, supra;1997 Tax Ct. Memo LEXIS 379">*390 also see 35 F.3d 93">Taggi v. United States, supra at 96 (a claim must be bona fide, but does not necessarily have to be sustainable or valid).

We now turn to the language of the release itself. The release in this case is the same as that in Webb v. Commissioner, T.C. Memo. 1996-50, and essentially the same as that in Sodoma v. Commissioner, supra.By its terms, petitioner released IBM from liability for both contract and tort claims. The release, however, does not specifically indicate that the lump-sum payment received by petitioner was paid to settle a potential personal injury claim against IBM. We note that where the settlement agreement lacks express language stating what the settlement amount was paid to settle, then the most important factor is the intent of the payor. Knuckles v. Commissioner, 349 F.2d 610">349 F.2d 610, 349 F.2d 610">612 (10th Cir. 1965), affg. T.C. Memo. 1964-33; 98 T.C. 1">Stocks v. Commissioner, supra at 10. Here, respondent argues, and we agree, that IBM did not make the payment on account of a personal injury. The release1997 Tax Ct. Memo LEXIS 379">*391 form appears to be a standard document used by IBM for all of its employees who participate in the ITO II Program. Moreover, the amount of the $ 52,169 lump-sum payment was calculated on the number of years of service and petitioner's salary. Finally, the release states that if petitioner were rehired by IBM, he could be required to repay some portion of the lump-sum payment based on the number of weeks off the IBM payroll compared with the number of weeks' salary used to calculate the lump-sum payment. As in Sodoma v. Commissioner, supra, and Webb v. Commissioner, supra, the lump-sum payment herein appears to have been severance pay rather than a payment for personal injury. Severance pay, just like the pay it replaces, is taxable income.

Finally, we note that petitioner has not alleged or come forward with any evidence of the specific amounts of the payments allocable to claims of tort or tort-type damages for personal injuries. Failure to do so results in the entire amount being presumed to be taxable. See 35 F.3d 93">Taggi v. United States, supra;Getty v. Commissioner, 91 T.C. 160">91 T.C. 160, 91 T.C. 160">175-176 (1988),1997 Tax Ct. Memo LEXIS 379">*392 affd. as to this issue and revd. on other issues 913 F.2d 1486">913 F.2d 1486 (9th Cir. 1990). The release makes no allocation, and petitioner has not set forth any facts upon which he would rely to prove an allocation. Indeed, the fact that the $ 52,169 was based on time of service and rate of pay points in the direction of its having been severance pay rather than a payment for personal injury. See Webb v. Commissioner, supra, which involved the same payor and substantially the same plan as involved herein.

In sum, viewing the facts in a light most favorable to petitioner, we conclude that respondent has made a prima facie case to support a motion for summary judgment and that petitioner has failed to come forward with countervailing assertions having sufficient specificity to cause us to hold that there is any material issue of fact which requires a trial. Accordingly, we hold that respondent's motion for summary judgment will be granted.

To reflect the foregoing,

An appropriate order and decision will be entered granting respondent's motion for summary judgment.