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income the total $320,880 received from the Doctor's Insurance
and from the State's Insurance.
On audit, respondent determined that $143,407 of the total
$320,880 petitioner received constituted interest income and
should be included in petitioners' gross income.
OPINION
Under section 61(a), gross income includes all income from
whatever source derived unless otherwise excluded by the Internal
Revenue Code. Under section 61(a)(4), interest income is
specifically included in the computation of gross income.
Under section 104(a)(2), however, “damages” received
relating to personal injuries are excluded from gross income.
Section 104(a) states in relevant part as follows:
(a) In general.–- Except in the case of amounts
attributable to (and not in excess of) deductions allowed
under section 213 (relating to medical, etc., expenses) for
any prior taxable year, gross income does not include–-
* * * * * * *
(2) the amount of any damages received (whether by
suit or agreement and whether as lump sums or as
periodic payments) on account of personal injuries or
sickness;
As is noted, “interest” on funds relating to personal injuries is
not mentioned in the exclusionary language of section 104(a)(2).
Generally, exclusions from gross income are to be narrowly
construed. See Commissioner v. Jacobson, 336 U.S. 28, 49 (1949);
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Last modified: May 25, 2011