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information. The damages were intended to replace salary and
benefits wrongfully taken from him “on account of” his
constructive discharge--not because of any personal injury.
Moreover, petitioner’s injuries did not prevent him from working
at all--at BCal or elsewhere. We note that, after leaving BCal,
petitioner actively searched for employment and was self-
employed.
Accordingly, petitioner’s economic damages are not “on
account of personal injury or sickness” and as such, do not meet
the Schleier test. Petitioner’s economic damages are not
excludable from his gross income.
B. Punitive Damages
Petitioner also received $5 million in punitive damages. As
with his economic damages, petitioner claims that section
104(a)(2) applies to exclude this amount from his gross income.
Petitioner would have us accept his interpretation of the
following legislation added to section 104(a)(2) in 1989:
“Paragraph 2 [excluding from gross income any damages received on
account of personal injuries or sickness] shall not apply to any
punitive damages in connection with a case not involving physical
injuries.” Petitioner contends that the use of a double negative
in this phrase creates a positive. In other words, petitioner
believes that Congress intended for all punitive damages to be
excludable from gross income in any case involving physical
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