Paul E. Ballmer - Page 7
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Petitioner’s argument is quite similar to that asserted
before and ultimately rejected by the Court of Appeals for the
District of Columbia Circuit. Murphy v. IRS, 493 F.3d 170 (D.C.
Cir. 2007).3 The Court of Appeals held that for the flush
language of section 104(a) to make sense, the definition of gross
income in section 61(a) must first include damages for
nonphysical emotional distress injuries. Id. Further, this
Court has held that compensation for nonphysical emotional
distress injuries is gross income not excluded pursuant to
section 104(a)(2). See, e.g., Goode v. Commissioner, T.C. Memo.
2006-48; Hawkins v. Commissioner, T.C. Memo. 2005-149.
We see no reason to depart from these decisions or the
statutory language. Accordingly, we conclude petitioner’s award
of compensatory damages for emotional distress is gross income
under section 61(a) and not excluded under section 104(a)(2).
Further, the award of attorney’s fees and litigation costs as
well as postjudgment interest are also gross income. Sec. 61(a);
Commissioner v. Banks, 543 U.S. 426, 429-430 (2005); Sinyard v.
3At first, the Court of Appeals for the District of Columbia
Circuit agreed with a position similar to petitioner’s and held
that compensation for the loss of a personal attribute such as
well-being was not income within the meaning of the Sixteenth
Amendment. Murphy v. IRS, 460 F.3d 79 (D.C. Cir. 2006).
However, the Court of Appeals then vacated its decision, Murphy
v. IRS, 99 AFTR 2d 2007-396, 2007-1 USTC par 50,228 (D.C. Cir.
2006), and heard additional arguments before issuing its decision
rejecting that position, Murphy v. IRS, 493 F.3d 170 (D.C. Cir.
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Last modified: November 10, 2007