- 34 -
116, 125-126 (1994), in which we stated:
Under section 104(a)(2), gross income does not include
the amount of any damages received (whether by suit or
agreement) on account of personal injuries or sickness.
From that section, and the regulations thereunder, we
understand that damages received through a settlement
of a lawsuit are excludable from gross income only if
the damages were received on account of a "tortlike
personal injury". For this purpose, no distinction is
drawn between tortlike personal injuries that are
physical versus tortlike personal injuries that are
nonphysical (i.e., psychological). Thus, for example,
damages are excludable from gross income under section
104(a)(2) if the damages were received pursuant to a
settlement of a tortlike personal injury that resulted
in: * * * punitive damages, Horton v. Commissioner, 100
T.C. 93, 96 (1993); see also Miller v. Commissioner, 93
T.C. 330, 337-342 (1989), revd. 914 F.2d 586 (4th Cir.
1990). [Some citations omitted; emphasis added.]
As the lawsuit in the Robinson case included an award for
mental anguish, as well as punitive damages, we allocated a
percentage of the settlement amount to punitive damages and held
that the taxpayers could exclude that percentage from their gross
income under section 104(a)(2). Id. at 136. The Court of
Appeals for the Fifth Circuit, citing Estate of Moore v.
Commissioner, 53 F.3d 712 (5th Cir. 1995), revg. and remanding
T.C. Memo. 1994-4, reversed that part of our decision. Robinson
v. Commissioner, 70 F.3d at 37 & n.4.
It is clear from these decisions that, until Estate of Moore
v. Commissioner, supra, was reversed, this Court was of the
opinion that taxpayers residing in Texas could exclude punitive
damages from income under section 104(a)(2). We therefore find
that there was substantial authority for petitioners' reporting
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