- 32 -
therefore on respondent to prove that petitioners were negligent
or disregarded rules or regulations. Rule 142(a).
Punitive Damages
The issue of whether punitive damages received in a tort or
tortlike suit are excludable from income was resolved by the
Supreme Court in O'Gilvie v. United States, 519 U.S. 79, 117 S.
Ct. 452 (1996). Before the Supreme Court's decision, the Courts
of Appeals for the Fourth, Ninth, and Tenth Circuits had held
that punitive damages are not excluded from income under section
104(a)(2), and the Court of Appeals for the Sixth Circuit had
held they are excluded.18 Id. at ___, 117 S. Ct. at 454. The
Supreme Court granted certiorari to resolve the conflict among
the circuits. The Supreme Court held that punitive damages
received in a tort suit for personal injuries were not received
"on account of" personal injuries and, therefore, were not
excluded from taxable gross income as defined during the years at
issue.19 Id.
18 See O'Gilvie v. United States, 66 F.3d 1550 (10th Cir.
1995), affd. 519 U.S. 79, 117 S. Ct. 452 (1996); Hawkins v.
United States, 30 F.3d 1077 (9th Cir. 1994); Horton v.
Commissioner, 33 F.3d 625 (6th Cir. 1994), affg. 100 T.C. 93
(1993); Commissioner v. Miller, 914 F.2d 586 (4th Cir. 1990),
revg. and remanding 93 T.C. 330 (1989).
19 The Omnibus Budget Reconciliation Act of 1989 (OBRA),
Pub. L. 101-239, sec. 7641(a), 103 Stat. 2379, amended sec.
104(a) by adding the sentence "Paragraph (2) shall not apply to
any punitive damages in connection with a case not involving
physical injury or physical sickness." OBRA sec. 7641(b)(2), 103
Stat. 2379, provided the amendment shall not apply to any amount
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