-7-
* * * * * * *
(2) the amount of any damages (other than
punitive damages) received (whether by suit or
agreement and whether as lump sums or as periodic
payments) on account of personal physical injuries
or physical sickness;
* * * * * * *
* * * For purposes of paragraph (2), emotional distress
shall not be treated as a physical injury or physical
sickness. The preceding sentence shall not apply to an
amount of damages not in excess of the amount paid for
medical care * * * attributable to emotional distress.
The legislative history accompanying passage of the SBJPA
clarifies 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. Post-SBJPA section 104 is
generally effective for amounts received after August 20, 1996,
in tax years ending after such date. SBJPA sec. 1605(d), 110
Stat. 1839.
Petitioners assert that petitioner suffered physical
sickness and injury in the form of emotional distress and that a
portion of the damages award should be excluded from their gross
income. The language of section 104(a)(2) and the accompanying
legislative history make clear that damages for emotional
distress and resultant symptoms are not excluded from gross
income by section 104(a)(2).
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