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the Supreme Court issued its opinion in Schleier, Congress
amended (1996 amendment) section 104(a)(2), effective for amounts
received after August 20, 1996, by adding the requirement that,
in order to be excluded from gross income, any amounts received
must be on account of personal injuries that are physical or
sickness that is physical.5 Small Business Job Protection Act of
1996, Pub. L. 104-188, sec. 1605, 110 Stat. 1755, 1838-1839. The
1996 amendment does not otherwise change the requirements of
section 104(a)(2) or the analysis set forth in Commissioner v.
Schleier, supra; it imposes an additional requirement for an
amount to qualify as an exclusion from gross income under that
section.
Where damages are received pursuant to a settlement agree-
ment, such as is the case here, the nature of the claim that was
the actual basis for settlement controls whether such damages are
excludable under section 104(a)(2). United States v. Burke,
supra at 237. The determination of the nature of the claim is
factual. Robinson v. Commissioner, 102 T.C. 116, 126 (1994),
affd. in part, revd. in part, and remanded on another issue 70
5Sec. 104(a) provides that emotional distress is not to be
treated as a physical injury or physical sickness for purposes of
sec. 104(a)(2), except for damages not in excess of the amount
paid for medical care attributable to emotional distress. In
this connection, the legislative history of the 1996 amendment
states: “It is intended that the term emotional distress in-
cludes symptoms (e.g., insomnia, headaches, stomach disorders)
which may result from such emotional distress.” H. Conf. Rept.
104-737, at 301 n.56 (1996), 1996-3 C.B. 741, 1041 n.56.
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