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by the Small Business Job Protection Act of 1996 (SBJPA), Pub. L.
104-188, sec. 1605, 110 Stat. 1838, section 104 read in pertinent
part as follows (pre-SBJPA section 104):
SEC. 104. COMPENSATION FOR INJURIES OR SICKNESS.
(a) In General.--Except in the case of amounts
attributable to (and not in excess of) deductions
allowed under section 213 (relating to medical, etc.,
expenses) for any prior taxable year, gross income does
not include--
* * * * * * *
(2) 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;
The reference to personal injuries in this former version of the
statute did not include purely economic injuries but did embrace
“nonphysical injuries to the individual, such as those affecting
emotions, reputation, or character”. United States v. Burke,
supra at 235 n.6, 239; see Commissioner v. Schleier, supra at
329-331; Roemer v. Commissioner, 716 F.2d 693 (9th Cir. 1983)
(holding that compensation paid for defamation, as defined by
California law, is excludable from income pursuant to pre-SBJPA
section 104), revg. 79 T.C. 398 (1982); see also Threlkeld v.
Commissioner, 87 T.C. 1294 (1986) (aligning the Court with the
decision in Roemer), affd. 848 F.2d 81 (6th Cir. 1988).
The SBJPA then amended section 104, as relevant here, to
provide (post-SBJPA section 104):
SEC. 104. COMPENSATION FOR INJURIES OR SICKNESS.
(a) In general.--Except in the case of amounts
attributable to (and not in excess of) deductions
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