What is the test for determining whether a personal injury settlement is taxable or severance pay?

In addition, we may examine the intentions of bothparties to the settlement, and in particular the purpose of the payor, as reflected in any written settlement agreement or other evidence. When the parties have not expressly designated the nature of the settlement amount or allocated it among various taxable and tax-exempt components, our decision in Agar v. Commissioner, 290 F.2d 283 (2d Cir. 1961) (per curiam), provides guidance. At issue there was whether a settlement payment to an employee, made after he resigned and threatened to sue for slander, represented compensation for personal injuries (not taxable) or severance pay (taxable). The parties'

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