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physical injuries. Commissioner v. Schleier, supra at 329 n.4;
United States v. Burke, supra at 234 n.6; Threlkeld v.
Commissioner, 87 T.C. 1294, 1305 (1986), affd. 848 F.2d 81 (6th
Cir. 1988).3 In United States v. Burke, supra at 239, the
Supreme Court distinguished personal tort-like injuries from
“legal injuries of an economic character”. Similarly, in
Commissioner v. Schleier, supra at 331, the Supreme Court
distinguished “injuries that were personal rather than economic”.
See also Robinson v. Commissioner, 102 T.C. 116, 126 (1994),
affd. in part, revd. in part on another issue 70 F.3d 34 (5th
Cir. 1995) and cases cited therein (damages are not excludable
under section 104(a)(2) if they are “received pursuant to the
settlement of economic rights arising out of a contract (e.g.,
lost profits))”; Kightlinger v. Commissioner, T.C. Memo. 1998-
357, and cases cited therein (recovery for injuries to “business
or property” is separate and distinct from recovery for personal
injuries).
To determine whether damages are received on account of
personal injuries under section 104(a)(2), we look to the nature
of the claim underlying the damages award. United States v.
3 In 1996, Congress limited sec. 104(a)(2) to damages
received on account of a personal “physical” injury or “physical”
sickness, effective generally with respect to amounts received
after June 30, 1996. Small Business Job Protection Act of 1996,
Pub. L. 104-188, sec. 1605, 110 Stat. 1838. Because of the
prospective effective date, this amendment does not apply to the
case at hand. The conference report indicates that no inference
was intended as to the application of sec. 104(a)(2) prior to
June 30, 1996, in connection with a case not involving a physical
injury or physical sickness. H. Conf. Rept. 104-737, at 300
(1996).
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