-5-
(B) to substantiate items, to maintain required records, and to
cooperate fully with reasonable requests of the Commissioner.
See sec. 7491(a)(2).
Section 61(a) provides that gross income includes all income
from whatever source derived. Section 61(a) is construed broadly
to reach any accession to wealth. Exclusions from gross income,
on the other hand, are construed narrowly. Commissioner v.
Schleier, 515 U.S. 323, 328 (1995); United States v. Burke, 504
U.S. 229, 233 (1992); Commissioner v. Glenshaw Glass Co., 348
U.S. 426, 431 (1955).
The parties disagree over the applicability of section
104(a)(2) to the net settlement payment of $20,309 ($30,000 less
$9,691). That section as applicable herein 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”. In this context, the terms “physical
injury” and “physical sickness” do not include emotional
distress, except to the extent of damages not in excess of the
amount paid for medical care described in section 213(d)(1)(A)
and (B) attributable to emotional distress. See the flush
language of section 104(a).
The term “damages received”, as used in section 104(a)(2),
denotes an amount received “through prosecution of a legal suit
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