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to deter future malicious actions. In Team Cent., Inc. v. Teamco, Inc., 271
N.W.2d 914, 925 (Iowa 1978), the Iowa Supreme Court stated that the purpose of
punitive damages is to punish the wrongdoer rather than to compensate the
victim. This case is in line with previous cases by the Supreme Court of
Iowa. In Meyer v. Nottger, 241 N.W.2d 911, 922 (Iowa 1976), the court stated:
Exemplary damages are not intended to be compensatory. An
award of exemplary damages is never made as a matter of right, but
depends upon whether under the facts in a particular case such
award is appropriate in order to punish an offending party or
discourage others from similar wrongful conduct. [Citations
omitted.]
The court in Meyer v. Nottger, supra, concluded that the noncompensatory
nature of punitive damages is well established under Iowa law.
The Supreme Court stated in Commissioner v. Schleier, supra at 2165--
We have already concluded that the liquidated damages provisions
of the ADEA were a significant departure from those in the FLSA *
* * and we explicitly held in Thurston "Congress intended for
liquidated damages to be punitive in nature." Id., at 125, 105
S.Ct. at 624. [Citations and fn. ref. omitted.]
We conclude that in Commissioner v. Schleier, supra, the Supreme Court
effectively overruled the part of our holding and that of the Court of Appeals
for the Sixth Circuit in Horton v. Commissioner, supra, that since the claim
as originally made was one for a personal injury or a tortlike claim, even if
the punitive damages received were as punishment for malicious actions and an
example to deter others from such malicious action, they are excludable from
income under section 104(a)(2). We will, therefore, no longer follow our
opinion in Horton v. Commissioner, supra, to the extent that it holds that
punitive damages which are not compensatory in nature are excludable from
income under section 104(a)(2). We, therefore, hold that the $1 million
received by petitioner in 1987, composed of $500,000 received on April 23,
1987, pursuant to the judgment entered by the District Court and the $500,000
received on September 8, 1987, as part of the settlement of the remaining
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