Norris O. and Betty J. Whitley - Page 6

                                        - 6 -                                         

          either requirement is not met.  See sec. 104(a)(2);                         
          Commissioner v. Schleier, 515 U.S. 323, 336-337 (1995); United              
          States v. Burke, 504 U.S. 229, 233 (1992); sec. 1.104-1(c),                 
          Income Tax Regs.                                                            
               In O'Gilvie v. United States, 519 U.S. 79 (1996), the                  
          Supreme Court held that section 104(a)(2) did not reach punitive            
          damages which were awarded under Kansas law to the taxpayers, the           
          husband and two children of a woman who died of toxic shock                 
          syndrome.  The taxpayers had recovered those damages in a tort              
          action filed against the maker of a product that caused the                 
          decedent's death.  The Court held that the taxpayers did not                
          receive the punitive damages on account of personal injury                  
          because the damages were not awarded as compensation for the                
          injury suffered by them or by the decedent but to punish and                
          deter the tortfeasor's reprehensible conduct.  See id.                      
               Petitioner recognizes the holding in O'Gilvie v. United                
          States, supra, but argues that it is inapplicable.  First,                  
          petitioner states, South Carolina law provides that punitive                
          damages are compensatory in nature, whereas Kansas law provides             
          that punitive damages are entirely punitive.  Second, petitioner            
          states, the fact that many decisions prior to O'Gilvie were                 
          inconsistent with the decision there requires that we apply                 
          O'Gilvie prospectively.  Petitioner makes a similar argument for            
          a prospective application of Commissioner v. Schleier, supra, and           
          United States v. Burke, supra.                                              

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  Next

Last modified: May 25, 2011