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income.1 The 1999 amended return was treated as a claim for
refund and denied by respondent.
Discussion
Section 61(a) provides generally and broadly that gross
income includes all income from whatever source derived.
Exclusions from gross income must be specifically provided for
and are narrowly construed. Commissioner v. Schleier, 515 U.S.
323, 328 (1995).
Section 104(a)(2) excludes from gross income “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”. Section 104(a) further provides that “emotional
distress shall not be treated as a physical injury or physical
sickness” for purposes of section 104(a)(2). “[T]he 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.
Amounts are excludable from gross income under section
104(a)(2) only if: (1) The underlying cause of action giving
1 On the 1999 amended return, petitioners exclude
settlement proceeds of $199,702 from gross income and not
$199,073. The parties do not explain this difference. However,
this discrepancy is of no significance to our conclusion.
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