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to section 7491(a), the burden of proof as to factual matters
shifts to respondent under certain circumstances. Petitioner has
neither alleged that section 7491(a) applies nor established her
compliance with the requirements of section 7491(a)(2)(A) and (B)
to substantiate items, maintain records, and cooperate fully with
respondent’s reasonable requests. Petitioner therefore bears the
burden of proof.
A taxpayer’s gross income includes all income from whatever
source derived unless excluded by a specific provision of the
Internal Revenue Code. Sec. 61(a). Gross income does not
include “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”. Sec. 104(a)(2). To qualify for this
exclusion, the taxpayer must demonstrate: (1) The underlying
cause of action giving rise to the recovery is based upon tort or
tort type rights; and (2) the damages were received on account of
personal physical injuries or physical sickness. Commissioner v.
Schleier, 515 U.S. 323, 337 (1995); Allum v. Commissioner, T.C.
Memo. 2005-177. The terms “physical injury” and “physical
sickness” do not include emotional distress, except to the extent
of damages not in excess of the amount paid for medical care
attributable to emotional distress. Sec. 104(a) (flush
language); see also Prasil v. Commissioner, T.C. Memo. 2003-100.
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Last modified: May 25, 2011