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term emotional distress includes symptoms (e.g., insomnia,
headaches, stomach disorders) which may result from such
emotional distress.”5 H. Conf. Rept. 104-737, at 301 n.56
(1996), 1996-3 C.B. 741, 1041.
Respondent determined that petitioner must include the
$58,000 amount in income because none of it was received on
account of any physical injury or physical sickness. Conversely,
petitioner asserts that the entire $58,000 amount is excludable
from income under section 104(a)(2) because she received it for
personal injuries she sustained during her pregnancy and the
premature birth of her twins.
Petitioner must satisfy two requirements to exclude the
$58,000 amount from income under section 104(a)(2). She must
prove first that the underlying cause of action giving rise to
her recovery of the payment is based upon tort or tort type
rights, and second that the payment was received on account of
5Petitioner’s complaint raised intentional infliction of
emotional distress as a cause of action. However, the Small
Business Job Protection Act of 1996, Pub. L. 104-188, sec. 1605,
110 Stat. 1838 (the 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.
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