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subtitle, gross income means all income from whatever source
derived". Not only is section 61(a) broad in its scope, Commis-
sioner v. Schleier, 515 U.S. 323, 328 (1995), exclusions from
gross income must be narrowly construed, id.; United States v.
Burke, 504 U.S. 229, 248 (1992).
Section 104(a)(2) on which petitioner relies provides that
gross income does not include:
(2) the amount of any damages (other than puni-
tive damages) received (whether by suit or agreement
and whether as lump sums or as periodic payments) on
account of personal physical injuries or physical
sickness;
The regulations under section 104(a)(2) restate the statu-
tory language of that section and further provide:
The term "damages received (whether by suit or agree-
ment)" means an amount received (other than workmen's
compensation) through prosecution of a legal suit or
action based upon tort or tort type rights, or through
a settlement agreement entered into in lieu of such
prosecution. [Sec. 1.104-1(c), Income Tax Regs.]
The Supreme Court summarized the requirements of section
104(a)(2) as follows:
In sum, the plain language of � 104(a)(2), the
text of the applicable regulation, and our decision
in Burke establish two independent requirements that
a taxpayer must meet before a recovery may be ex-
cluded under � 104(a)(2). First, the taxpayer must
demonstrate that the underlying cause of action giv-
ing rise to the recovery is "based upon tort or tort
type rights"; and second, the taxpayer must show that
the damages were received "on account of personal
injuries or sickness." * * * [Commissioner v.
Schleier, supra at 336-337.]
When the Supreme Court issued its opinion in Commissioner v.
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