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104(a)(2). However, petitioner’s argument assumes that the
origin of the claim is the only relevant inquiry. A two-part
test for the section 104(a)(2) exclusion was established in
Commissioner v. Schleier, 515 U.S. 323, 333 (1995). Schleier
requires that, in addition to the law suit’s being based upon a
tort claim, the damages received must have been “on account of
personal injuries or sickness”. Id.
The factual circumstances in this case reflect that
petitioner’s economic damages were not “on account of personal
injuries or sickness”. Rather, petitioner’s economic damages
were intended to replace wages and other compensation lost when
he was forced to leave his job. While in some circumstances
economic damages measured by lost wages can satisfy the second
prong of the Schleier test, petitioner’s economic damages do not.
For instance, if a taxpayer were unable to work as a direct
result of his physical injuries, the economic damages he received
to replace his lost wages would be excludable. Id.; Rev. Rul.
85-97, 1985-2 C.B. 50. In short, the taxpayer’s physical
injuries would have been the direct cause of his inability to
work.
Although petitioner was forced to leave his job because of a
tort and he had manifestations of emotional distress, he was not
forced to leave his job because of those injuries. Rather, he
was forced to leave because he refused to disclose confidential
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