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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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