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Calvin,
If you wanted to try and take the position that any amounts you receive in settlement are excludable from income, I would suggest that you have an attorney look at the settlement papers the insurance company will ask you to sign. He or she might advise to have language in the agreement to the effect that it is agreed by the parties that the amounts paid and received are in for ... and then specify the particular categories of excludable items listed in Publication 525 for which your son is being compensated (say, 1. compensation for physical injury and sickness...$xx; 2. loss of earning capacity...$$; 3. disfigurement...$$; and so on). But you should check with your attorney as to how to proceed.
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