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OPINION
Petitioners argue that the amounts that Katherine and Damian
received pursuant to the settlement agreement with Maritz Inc.
were entirely on account of personal injuries within the meaning
of section 104(a)(2) and so are excludable from income.
Petitioners bear the burden of proof. See Rule 142(a).4
I. General Principles
Except as otherwise provided in subtitle A of the Internal
Revenue Code, gross income means income from all sources. Sec.
61(a). This statutory provision is construed broadly, unlike
statutory exclusions from income, which are construed narrowly.
See Commissioner v. Schleier, 515 U.S. 323, 328 (1995).
Section 104(a)(2) excludes from gross income “the amount of
any damages received (whether by suit or agreement and whether as
lump sums or as periodic payments) on account of personal
injuries or sickness”. This provision excludes from gross income
only amounts that are received both: (1) Through prosecution or
settlement of an action based upon tort or tort type rights; and
(2) on account of personal injuries or sickness. Commissioner v.
Schleier, supra at 333; Bagley v. Commissioner, 105 T.C. 396, 416
4 Respondent’s examination of petitioners’ 1994 returns
commenced before July 22, 1998. Consequently, sec. 7491(a),
which in some circumstances may place the burden of proof on the
Commissioner, has no application here. See Internal Revenue
Service Restructuring and Reform Act of 1998, Pub. L. 105-206,
sec. 3001(c), 112 Stat. 727.
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