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settlement had no effect on the amount petitioner had received from
UNUM in 1997 or 1998.
Discussion
Gross income includes all income from whatever source derived.
Sec. 61. Generally, amounts received through accident or health
insurance for personal injuries or sickness are excluded from gross
income under section 104(a)(3), unless the amounts are either (1)
attributable to contributions by the employer that were not
includable in the gross income of the employee or (2) paid by the
employer. If amounts received by an employee through accident or
health insurance for personal injuries or sickness are either (1)
attributable to contributions by the employer that were not
includable in the gross income of the employee or (2) paid by the
employer, then the amounts are specifically included in the
employee’s gross income under section 105(a).
Four conditions must be met for section 105(a) to apply. See
Kees v. Commissioner, T.C. Memo. 1999-41. First, the amounts must
be received through accident or health insurance; second, the
amounts must be for personal injuries or sickness; third, the
amounts must be attributable to contributions made by the employer;
and fourth, the employer’s contributions must not have been
includable in the employee’s gross income.
In the instant case, petitioner received $286,931.22 in 1997
and $115,597.08 in 1998 from UNUM under the UNUM policy, an
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Last modified: May 25, 2011