Barbara Bond - Page 6

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               2.   Petitioner’s Emotional Distress                                   
               Petitioner was hospitalized for depression and emotional               
          distress in March 2002, which she testified were caused by Ivy              
          Tech’s conduct.  Petitioner contends that an unspecified amount             
          of the $25,000 payment was intended to compensate her for                   
          depression and emotional distress and is excludable under section           
          104(a)(2).  We disagree.                                                    
               Damages attributable to emotional distress are excludable              
          from income under section 104(a)(2) up to the amount paid for               
          medical care described in section 213(d)(1)(A) and (B).  Sec.               
          104(a) (flush language).3  The record does not contain any                  
          information relating to the amount of petitioner’s                          
          hospitalization expenses for depression or any related medical              
          expenses, and so we have no basis on which to allocate any part             
          of the $25,000 to those costs.                                              

               3  Sec. 104(a)(2) was amended in 1996 by the Small Business            
          Job Protection Act of 1996 (SBJPA), Pub. L. 104-188, sec.                   
          1605(a), 110 Stat. 1838, effective generally for amounts received           
          after Aug. 20, 1996.  In relevant part, the amendment added the             
          modifier “physical” after “personal” and before “injuries” and              
          the modifier “physical” was added before “sickness”.  The                   
          amendment also provides that emotional distress shall not be                
          treated as a physical injury or physical sickness except to the             
          extent of damages not in excess of the amount paid for medical              
          care described in sec. 213(d)(1)(A) and (B) attributable to                 
          emotional distress.  Sec. 104(a) (flush language).  The                     
          legislative history accompanying enactment of the SBJPA states              
          that “the term emotional distress includes 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.                                              

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