OPINION

As a general rule, the Commissioner's determinations are presumed correct, and the taxpayer bears the burden of proving that those determinations are erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111">290 U.S. 111, 290 U.S. 111">115 (1933). 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). In this regard, 1997 Tax Ct. Memo LEXIS 18">*23 statutory exclusions from income must be narrowly construed. Commissioner v. Schleier, 515 U.S.    ,    , 115 S. Ct. 2159">115 S. Ct. 2159, 115 S. Ct. 2159">2163 (1995).

Section 104(a)(2) excludes from gross income "the amount of any damages received (whether by suit or agreement * * *) on account of personal injuries or sickness". This exclusion is warranted when: (1) The underlying cause of action giving rise to the recovery of the funds in question is based upon tort or tort-type rights and (2) the funds are received on account of personal injury or sickness. O'Gilvie v. United States, 519 U.S.    , 117 S. Ct. 452 (1996); Commissioner v. Schleier, 515 U.S. at    , 115 S. Ct. at 2163; P & X Mkts., Inc. v. Commissioner, 106 T.C. 441">106 T.C. 441, 106 T.C. 441">443-444 (1996); sec. 104(a)(2); sec. 1.104-1(c), Income Tax Regs. Where damages are received pursuant to a settlement agreement, the nature of the claim that constitutes the actual basis for settlement controls whether such 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); Foster v. Commissioner, T.C. Memo. 1996-276.1997 Tax Ct. Memo LEXIS 18">*24 "The critical question is, in lieu of what was the settlement amount paid?" Bagley v. Commissioner, 105 T.C. 396">105 T.C. 396, 105 T.C. 396">406 (1995). In determining the answer to this question, the most important factor is the intent of the payor. Robinson v. Commissioner, 102 T.C. 116">102 T.C. 116, 102 T.C. 116">127 (1994), affd. in part and revd. in part 70 F.3d 34">70 F.3d 34 (5th Cir. 1995).

While the parties' settlement agreement does not in any manner allocate the proceeds to any particular claim raised by petitioner, the settlement reflects the parties' willingness to accede to the conclusions of the mediation panel. Therefore, we find that the mediation panel's evaluation served as the basis of the settlement. Petitioner's mediation summary, furnished to the panel prior to the mediation hearing, asserted claims that United breached an employment agreement by terminating petitioner. The mediation summary, however, did not discuss any of the tort-related claims contained in petitioner's original complaint. Moreover, the mediation summary's proposal of damage amounts appears to be based upon petitioner's lost earnings, rather than upon any specific 1997 Tax Ct. Memo LEXIS 18">*25 personal injury sustained by petitioner. The mediation panel's evaluation, as well as the settlement in question, were based upon the claim that United had breached an employment contract in terminating petitioner, resulting in economic damages from loss of benefits and wages. Therefore, petitioner has failed to meet his burden of proving that the settlement was based upon tort or tort-type claims. Furthermore, petitioner has failed to meet his burden of proving that the settlement proceeds were paid on account of personal injuries. Accordingly, we sustain respondent's determination.

To reflect the foregoing,

Decision will be entered under Rule 155.