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gross income pursuant to section 104(a)(2). See Alaska Stat. sec.
09.30.070 (Michie 1991). In contrast, respondent argues that
prejudgment interest does not constitute an award of damages within
the purview of section 104(a)(2).
We agree with respondent. Section 104(a)(2) excludes from
gross income the amount of any damages (other than punitive
damages) received on account of personal injuries or sickness.
Section 104 is to be narrowly construed; it does not specify that
interest is excluded from gross income. See Commissioner v.
Schleier, 515 U.S. at 337; Kovacs v. Commissioner, 100 T.C. 124,
128-130 (1993), affd. without published opinion 25 F.3d 1048 (6th
Cir. 1994). Conceptually, an award of damages is different from an
award of interest on damages. See Rozpad v. Commissioner, 154 F.3d
1, 5-6 (1st Cir. 1998), affg. T.C. Memo. 1997-528; Aames v.
Commissioner, 94 T.C. 189, 193 (1990); Greer v. Commissioner, T.C.
Memo. 2000-25. The term “damages” connotes the “compensation or
satisfaction imposed by law for a wrong or injury” while the term
“interest” means “the price paid for borrowing [or withholding]
money.” Kovacs v. Commissioner, supra at 128 (quoting Webster’s
Third New International Dictionary (1986)); Smith v. Commissioner,
59 T.C. 107, 111-113 (1972). In the context of section 104(a)(2),
“damages” do not include interest.
In sum, we hold that the $45,298 earmarked as “prejudgment
interest” does not constitute damages within the meaning of section
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