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(1942), which held that liquidated damages under the Fair Labor Standards Act
(FLSA) were "compensation, not a penalty or punishment". The Court, however,
distinguished liquidated damages recovered under the FLSA from those recovered
under the ADEA. In finding that section 104(a)(2) did not apply to liquidated
damages under the ADEA, the Court stated, "'Congress intended for liquidated
damages [under the ADEA] to be punitive in nature.'" Commissioner v.
Schleier, 515 U.S. , 115 S.Ct. at 2165 (quoting Trans World Airlines, Inc.
v. Thurston, 469 U.S. 111, 126 (1985)).
The taxpayer in the Schleier case made essentially the same argument as
the taxpayer in Horton v. Commissioner, 100 T.C. 93 (1993), with regard to
United States v. Burke, 504 U.S. 229 (1992). See Horton v. Commissioner,
supra at 96-99. The taxpayer argued that the Burke case stood for the
proposition that a taxpayer need only prove that the underlying claim was
based on a "tort or tort type rights" to be excludable under section
104(a)(2). In addressing the taxpayer's argument that the Burke case limited
the analysis under section 104(a)(2) to determining whether recovery is based
on "tort or tort type rights", the Supreme Court stated at 515 U.S. , 115
S.Ct. at 2167:
Second, and more importantly, the holding of Burke is
narrower than * * * [the taxpayer] suggests. In Burke, following
the framework established in the IRS regulations, we noted that
section 104(a)(2) requires a determination whether the underlying
action is "based upon tort or tort type rights." United States v.
Burke, 504 U.S., at 234, 112 S.Ct., at 1870. In so doing,
however, we did not hold that the inquiry into "tort or tort type
rights" constituted the beginning and end of the analysis. In
particular, though Burke relied on Title VII's failure to qualify
as an action based upon tort type rights, we did not intend to
eliminate the basic requirement found in both the statute and the
regulation that only amounts received "on account of personal
injuries or sickness" come within section 104(a)(2)'s exclusion.
Thus, though satisfaction of Burke's "tort or tort type" inquiry
is a necessary condition for excludability under section
104(a)(2), it is not a sufficient condition. [Fn. ref. omitted.]
In our view, the Supreme Court in the Schleier case adopted a position
contrary to our holding in the Horton case, that the underlying claim is the
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