-11-
This analysis is also guided by the “nature of the claim
underlying” the settlement. United States v. Burke, supra at
237. The question before us is whether the damages paid to
petitioner by DaimlerChrysler were for a personal physical
injury.
Petitioner’s complaint alleged that she suffered “anxiety,
embarrassment and humiliation,” as a result of the harassment,
and pain from the pinch. However, “mental anguish, humiliation,
and embarrassment are not personal physical injuries or physical
sickness * * * but are most akin to emotional distress.” Shaltz
v. Commissioner, T.C. Memo. 2003-173. Anxiety is also part of
emotional distress. 7 Restatement, Torts 2d, sec. 905 (1979).
Under the flush language of section 104, damages resulting from
emotional distress are not excludable from income. Therefore, if
the damages paid to petitioner are to satisfy the second prong of
Schleier, they must have been paid solely as a result of the
pinch.
The mere mention of a physical injury in a complaint does
not determine the nature of the claims. Emerson v. Commissioner,
T.C. Memo. 2003-82. In the case before the Court, the agreement
referenced the harassment, personal injury, and emotional
distress allegations, albeit in a preliminary “whereas” clause.
The document, however, does not contain any language which
specifically states that the amount paid was to settle the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011