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is to be applied is ‘the intent of the payor’ as to the purpose
in making the payment.” Id. at 847-848 (citing Knuckles v.
Commissioner, 349 F.2d 610, 613 (10th Cir. 1965), affg. T.C.
Memo. 1964-33).
Neither the text nor the legislative history of section
104(a)(2) offers any explanation of the term “personal
injuries”.2 Both the courts and the Commissioner long have
recognized, however, that the section 104(a)(2) reference to
“personal injuries” is not restricted to physical injuries but
encompasses nonphysical injuries to the individual, as well, such
as those affecting emotions, reputation, or character. See
United States v. Burke, 504 U.S. 229, 235 n.6 (1992). For
instance, we have on occasion found that damages received on
account of damage to a taxpayer’s business reputation were
excludable damages received on account of personal injury. E.g.,
Threlkeld v. Commissioner, 87 T.C. 1294, 1308 (1986) (based on
the nature of an action for malicious prosecution as an action
for personal injuries under Tennessee law, settlement payment
allocable to injury to professional reputation excludable from
gross income under section 104(a)(2)), affd. 848 F.2d 81 (6th
Cir. 1988). Nevertheless, as the Supreme Court recently made
clear in Commissioner v. Schleier, 515 U.S. 323, 329-330 (1995),
2 United States v. Burke, 504 U.S. 229, 234 (1992); see,
e.g., H. Rept. 1337, 83d Cong., 2d Sess. 15 (1954); S. Rept.
1622, 83d Cong., 2d Sess. 15-16 (1954).
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