- 8 - received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal injuries or sickness". The applicable regulations define "damages received" as “an amount received * * * through prosecution of a legal suit or action based upon tort or tort type rights”. Sec. 1.104-1(c), Income Tax Regs. In United States v. Burke, supra at 237, the Supreme Court held that to qualify for the section 104(a)(2) income exclusion, a taxpayer must show that the legal basis for recovery redresses a “tort-like personal injury”. In Commissioner v. Schleier, supra at 336, the Supreme Court concluded that a tort or tort-like claim is a necessary but insufficient condition for excludability under section 104(a)(2). The Supreme Court held that excludability under section 104(a)(2) also requires that the amounts received be “on account of personal injuries or sickness”, focusing on whether there is proximate cause between any personal injury and the damages recovered. Commissioner v. Schleier, supra at 336. In O’Gilvie v. United States, 519 U.S. 79 (1996), the Supreme Court revisited this issue. Acknowledging that “the phrase ‘on account of’ does not unambiguously define itself”, the Court rejected an interpretation of section 104(a)(2) that would require no more than a “but-for” connection between personal injuries and damages received, and instead required a “stronger causal connection, making the provision applicable only to thosePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011