- 21 - compensation for personal injuries or sickness. However, petitioners do not argue on brief that the amount they received from DHS in 1996 is excludable under section 104(a)(1) as an amount received under a workers’ compensation act.15 Petitioners argue that the amount Mr. Forste received from DHS pursuant to the settlement agreement is excludable under section 104(a)(2). Pursuant to section 104(a)(2), gross income does not include the amount of any damages received on account of personal injuries or sickness, regardless of whether the amount is received by suit or agreement and whether received in lump sums or as periodic payments. Damages are excludable under section 104(a)(2) provided: (1) The underlying cause of action is based upon tort or tort type rights; and (2) the damages were 15The regulations promulgated under sec. 104(a)(1) exclude amounts received under a statute in the nature of a workers’ compensation act which provides compensation to employees for personal injuries or sickness incurred in the course of employment. Sec. 1.104-1(b), Income Tax Regs. Mr. Forste did not file a claim for workers’ compensation benefits. Petitioners did not offer any evidence that they had any arguable claim against DHS for workers’ compensation, nor do they make any argument on brief that the amount at issue was received under a workers’ compensation act. The amount in issue was received under a settlement agreement between DHS and Mr. Forste. An agreement standing alone does not qualify as a “statute” for purposes of the regulations under sec. 104(a)(1). See Wallace v. United States, 139 F.3d 1165, 1167 (7th Cir. 1998) (“courts have always emphasized that the phrases ‘workers’ compensation acts’ and ‘statute in the nature of a workmen’s compensation act’ refer exclusively to legislative and administrative enactments”); Rutter v. Commissioner, 760 F.2d 466, 468 (2d Cir. 1985), affg. T.C. Memo. 1984-525.Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Next
Last modified: May 25, 2011