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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
notices:
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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