Clarence D. Kightlinger - Page 21

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          apply to a recovery for punitive damages not attributable to                
          "physical" injury.  Specifically, section 104(a) provides that              
          the exclusion from gross income for damages received on account             
          of personal injuries "shall not apply to any punitive damages in            
          connection with a case not involving physical injury or physical            
          sickness."  The Complaint did not even mention any physical                 
          injury, nor does petitioner claim any physical injury.                      
          Therefore, any portion of the settlement proceeds that may be               
          allocated to recovery for punitive damages is outside the scope             
          of section 104(a)(2).                                                       
               As a final note in this regard, we refer to the manner in              
          which counsel for the Plaintiffs summarized the class action                
          Complaint in two notices sent to the class members.                         
          Specifically, we refer to the following excerpt contained in both           
                    Plaintiffs in this class action lawsuit seek to                   
               recover, on behalf of themselves and all other similarly               
               situated workers, for the economic harm losses resulting               
               from AHP's relocation to Puerto Rico, and the related events           
               occurring thereafter.                                                  
               Having considered the allegations made in the Complaint and            
          the Plaintiffs' counsels' interpretation of the class action, we            
          cannot find that the Defendants intended to pay class members,              
          such as petitioner, on account of personal injury.  Although                
          mention of emotional harm was made, we do not think that an                 
          action that revolved around RICO violations and interference with           

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