- 12 - to, and did not, conclude Whittier’s actions caused or exacerbated her ulcers and thereby inflicted upon her a physical injury. We find that the jury did not conclude Whittier’s actions caused her any physical injury, and it awarded damages solely on the basis of Whittier’s discriminatory actions which caused her lost wages and emotional distress, neither of which provide a basis for exclusion from gross income.6 Thus, the jury verdict underlying the settlement does not support any apportionment of the settlement to “personal physical injury” damages excludable from gross income under section 104(a)(2). Petitioner invites the Court to look solely at the settlement agreement to determine the characterization of the $240,000. We decline to do so. In Robinson v. Commissioner, supra, the taxpayers sued a state bank for failing to release a lien on their property. After the jury returned a verdict in their favor for approximately $60 million, including $6 million for lost profits, $1.5 million for mental anguish, and $50 million in punitive damages, the parties settled. The final judgment prepared by the parties allocated 95 percent of the settlement to mental anguish and 5 percent to lost profits. We 6 Any damages received on account of emotional distress are excludable under sec. 104(a)(2) only to the extent that petitioner paid for medical care as to the emotional distress. See flush language of sec. 104(a). The record shows that petitioner’s insurance paid her medical bills. Her emotional distress claims therefore do not give rise to excludable income under sec. 104(a)(2).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011