Carrie Dawn Murray, n.k.a. Carrie Dawn Weaver - Page 9

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               The first issue for decision is what portion, if any, of the           
          $50,000 payment petitioner received in 1999 is excludable from              
          gross income.  We decide this issue on the merits based on the              
          preponderance of evidence, without regard to the burden of proof.           
          See sec. 7491(a); Rule 142(a)(1).                                           
               Section 61 provides that gross income generally includes all           
          income from whatever source derived.  However, section 104(a)(2)            
          excludes from gross income amounts received in damages, by suit             
          or settlement, “on account of personal physical injuries or                 
          physical sickness”.  In determining whether damages received are            
          excludable under section 104(a)(2), the focus is the nature of              
          the claim underlying the damage award.  United States v. Burke,             
          504 U.S. 229, 237 (1992).  The underlying claim giving rise to              
          the recovery must be “based upon tort or tort type rights” and              
          the damages must have been received “on account of personal                 
          injuries or sickness”.  Commissioner v. Schleier, 515 U.S. 323,             
          336-337 (1995).  Section 104(a)(2) was amended in 1996, effective           
          for amounts received after August 20, 1996, to require that the             
          personal injury or sickness be physical in nature; this amendment           
          does not otherwise change the analysis under Commissioner v.                
          Schleier, supra.  Prasil v. Commissioner, T.C. Memo. 2003-100.              
          For purposes of section 104(a)(2), emotional distress is not                
          treated as a physical injury or physical sickness, except for any           
          damages received that are not in excess of the amount paid for              






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