- 5 -
definition of gross income is broad in scope, Commissioner v.
Glenshaw Glass Co., 348 U.S. 426, 429-430 (1955), and exclusions
from gross income are narrowly construed, United States v. Burke,
504 U.S. 229, 248 (1992); United States v. Centennial Sav. Bank
FSB, 499 U.S. 573, 583 (1991).
Respondent’s determinations in the notice of deficiency are
presumed correct, and petitioner must prove those determinations
wrong in order to prevail.3 Rule 142(a); Welch v. Helvering, 290
U.S. 111, 115 (1933). As relevant to the present case, section
104(a)(2) excludes from gross income “the amount of any damages
(other than punitive 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”.4
The term “damages received” means an amount received “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.
Section 104(a) further provides that “emotional distress shall
3 Petitioner does not contend that sec. 7491(a) is
applicable to this case.
4 The Small Business Job Protection Act of 1996, Pub. L.
104-188, sec. 1605, 110 Stat. 1838 (1996 amendment), amended sec.
104(a)(2) to narrow the exclusion for personal injury damages
received pursuant to a judgment or settlement, effective for
amounts received after Aug. 20, 1996. Under the 1996 amendment,
personal injury or sickness must be physical in nature.
Moreover, the amendment explicitly excepts punitive damages from
the exclusion provided by sec. 104(a)(2).
Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011