- 6 -
OBRA 1989 section 7641(b)(2)(B), 103 Stat. 2379, provides that
the amendment to section 104(a)(2) shall not apply to any amount
received pursuant to any lawsuit filed on or before July 10,
1989. Petitioner's lawsuit against Union was filed on May 11,
1989, 2 months before the effective date of the amendment.
Therefore, this case is governed by section 104(a)(2) as it read
before the amendment, which is the same version interpreted by
the Supreme Court in O'Gilvie v. United States, supra. We
conclude that O'Gilvie is controlling authority, and accordingly
the punitive damages received by petitioner are not excludable
under section 104(a)(2).
Next, we address whether the amounts retained by
petitioner's attorneys should be excluded from petitioner's
income. Respondent determined that petitioner must include the
full amount of the punitive damages award in income but that she
may deduct the attorney's fees as a miscellaneous itemized
deduction. Petitioner contends that she is required to report as
income only that portion of the award paid to her by her
attorneys.
Petitioner relies on Cotnam v. Commissioner, 263 F.2d 119
(5th Cir. 1959), affg. in part and revg. in part 28 T.C. 947
(1957).3 In Cotnam the taxpayer was awarded a judgment of
3The Court of Appeals for the Eleventh Circuit, which
includes Alabama, has adopted as binding precedent the case law
of the former Court of Appeals for the Fifth Circuit as of
(continued...)
Page: Previous 1 2 3 4 5 6 7 8 Next
Last modified: May 25, 2011