- 12 - Welch v. Helvering, 290 U.S. 111, 115 (1933); Robinson v. Commissioner, 102 T.C. 116, 124 (1994), affd. in part, revd. in part on an issue not relevant herein and remanded 70 F.3d 34 (5th Cir. 1995). For 1990, section 104(a)(2) excludes from gross income “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”. Damage recoveries fall within this provision to the extent that: (1) The cause of action giving rise to the damages is based upon tort or tort type rights and (2) the damages are received on account of personal injuries or sickness. See Commissioner v. Schleier, 515 U.S. 323, 336-337 (1995). For the taxable year under consideration, personal injuries included both physical and nonphysical injuries. See id. at 329 n.4. The nature of the claim underlying a damage award, rather than the validity of the claim, determines whether damages meet the two-part Schleier test. See United States v. Burke, 504 U.S. 229, 237 (1992); Robinson v. Commissioner, supra at 125-126. Ascertaining the nature of the claim is a factual determination that is generally made by reference to the settlement agreement, in light of the facts and circumstances surrounding it. Key to this determination is the "intent of the payor" in making the payment. Knuckles v. Commissioner, 349 F.2d 610, 613 (10th Cir.Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
Last modified: May 25, 2011