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at 2164 n.4, we hold that the settlement proceeds allocable to
her mental distress claim were received on account of personal
injuries and are excludable from gross income by section
104(a)(2).
It has been established, however, that noncompensatory
punitive damages are not excludable from gross income under
section 104(a)(2). O'Gilvie v. United States, 519 U.S. ___, 117
S. Ct. 452 (1996); Commissioner v. Schleier, 515 U.S. at ___, 115
S. Ct. at 2165; Bagley v. Commissioner, 105 T.C. 396, 416 (1995).
At the time of petitioner's claim, Oklahoma law provided that a
jury could award punitive damages for the purposes of setting an
example and punishing the defendant. Okla. Stat. Ann. tit. 23,
sec. 9 (West 1987) (repealed by 1995 Okla. Sess. Laws 287); see
Okla. Stat. Ann. tit. 23, sec. 9.1 (West Supp. 1996) for current
version. Since Oklahoma law treats punitive damages as
noncompensatory, we conclude that the $13,500 of the settlement
proceeds that we allocated to punitive damages are not "on
account of" petitioner's personal injuries because they were not
"designed to compensate" petitioner for such personal injuries.
O'Gilvie v. United States, 519 U.S. ___, 117 S. Ct. at 455
(quoting Commissioner v. Schleier, 515 U.S. at ___ n.5, 115 S.
Ct. at 2165 n.5 (1995)).
We therefore hold that the punitive damages portion of the
settlement proceeds is not excludable from gross income by
section 104(a)(2).
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