-3-
income tax return. Respondent determined that petitioners’ 2002
gross income included the portion of the $115,330.49 that was
paid as prejudgment interest; i.e., $15,672.
Discussion
Petitioners argue that the $15,672 is excudable from their
gross income under section 104(a)(2). We disagree. A taxpayer’s
receipt of prejudgment interest is not excludable from his or her
gross income under section 104(a)(2). See Chamberlain v. United
States, 401 F.3d 335 (5th Cir. 2005); Rozpad v. Commissioner,
154 F.3d 1 (1st Cir. 1998), affg. T.C. Memo. 1997-528; Brabson v.
United States, 73 F.3d 1040 (10th Cir. 1996); Bagley v.
Commissioner, 105 T.C. 396, 419, affd. 121 F.3d 393 (8th Cir.
1997); Robinson v. Commissioner, 102 T.C. 116, 126 (1994), affd.
in part and revd. in part on an issue not relevant herein 70 F.3d
34 (5th Cir. 1995); Kovacs v. Commissioner, 100 T.C. 124, 129-130
(1993), affd. per curiam without published opinion 25 F.3d 1048
(6th Cir. 1994). Such is so even if State law characterizes the
interest as compensatory. See Chamberlain v. United States,
supra; see also Quantum Co. Trust v. Commissioner, T.C. Memo.
2000-149 (prejudgment interest awarded under Alaska law). We
sustain respondent’s determination.
Decision will be entered
for respondent.
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