- 8 -
Commissioner, T.C. Memo. 1997-315. Petitioner also relies on
section 8 of the Settlement Agreement that states that "all
settlement proceeds are paid to plaintiffs on account of personal
injuries".
Section 104(a)(2) provides that gross income does not
include "the amount of any damages received (whether by suit or
agreement* * *) on account of personal injuries or sickness".
Under section 1.104-1(c), Income Tax Regs., "damages" means a
recovery "based upon tort or tort type rights". See also
Commissioner v. Schleier, 515 U.S. 323 (1995). While personal
injuries, under section 104(a)(2), may generally include both
physical as well as nonphysical emotional injuries, such as "pain
and suffering, emotional distress, harm to reputation, or other
consequential damages (e.g., a ruined credit rating)", the
Supreme Court has distinguished such personal injuries from
"legal injuries of an economic character" such as those arising
out of the unlawful deprivation of the opportunity to earn wages
through a wrongful termination. United States v. Burke, 504 U.S.
229, 239, 245 (1992). Damages received for lost wages in
connection with the settlement of economic rights, such as those
arising out of a breach of contract, are not excludable from
income under section 104(a)(2). See Robinson v. Commissioner,
102 T.C. 116, 126 (1994), affd. in part, revd. in part on another
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011