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was working and more so after he quit his job with the highway
patrol. He also noticed that his sexual dysfunction improved
after retirement as well.
Connelly also experienced medical problems, such as loss
of hearing, lower back problems, high blood pressure, and
depression. He attributes his hearing loss to the State’s
failure to provide ear protection during firearms training and
the back problems to the physical demands placed on an officer,
such as sitting in a car for extended periods and helping
people on the road by pushing cars out of the way or pulling
people from cars. He believes that his depression resulted
from the stresses of the job. Connelly never filed a workman’s
compensation claim for any of these injuries.
OPINION
Petitioners contend that the liquidated damages portions
of their settlement payments were excludable from gross income
pursuant to section 104(a)(2) as compensation paid “on account
of personal injuries or sickness”. Respondent counters that
petitioners’ liquidated damages payments do not qualify for the
section 104(a)(2) income exclusion because they were not paid
as compensation for personal injuries or sickness and/or
because liquidated damages under FLSA are punitive. Section
104(a)(2) states that gross income shall not include “the
amount of any damages received (whether by suit or agreement
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