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injuries or sickness for which the damages were received were
physical in nature. Shaltz v. Commissioner, T.C. Memo. 2003-173;
Henderson v. Commissioner, T.C. Memo. 2003-168; Prasil v.
Commissioner, T.C. Memo. 2003-100.
II. Contentions of the Parties
The dispute between the parties in this case turns in large
part upon which version of section 104 is applicable to
petitioner’s situation. Petitioner contends that the statute as
it existed before amendment by the SBJPA controls. Specifically,
petitioner alleges that to consider her case under the amended
section 104 would inappropriately give the law retroactive
effect, in violation of the standard set forth by the U.S.
Supreme Court in Landgraf v. USI Film Prods., 511 U.S. 244
(1994). Further, it is petitioner’s position that the majority
of the damages she received, in particular those for mental
anguish and loss to reputation, are properly excluded from gross
income pursuant to the law in effect when she filed her tort
cause of action in 1994.
Conversely, respondent maintains that the amended version of
section 104, requiring proof of physical injuries or sickness, is
applicable here. Respondent argues that because petitioner is a
cash basis taxpayer and received the payment in question after
the effective date of the SBJPA, excludability of the damages is
governed by the revised statute. Respondent then asserts that
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