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“public policy” tort, and that tort caused a reduction in pay,
all damages received “on account of” that tort by Mrs. Campbell
are excludable from income under section 104(a)(2), as it existed
pre-1996.
Respondent disputes petitioners’ characterization of Mrs.
Campbell’s demotion without benefit of the RIF regulations as a
tort and argues that because the only remedy available to an
employee for an agency’s violation of the RIF regulations is
reinstatement and appropriate backpay, her cause of action
against OTS was not based on “tort or tort type rights” under the
definition enunciated by the Supreme Court in Commissioner v.
Schleier, supra, and United States v. Burke, supra. Respondent
further argues that, assuming that Mrs. Campbell’s claim against
OTS was based on tort or tort type rights, the ordered
restoration of her former pay grade coupled with back wages and
lost benefits was not awarded on “account of personal injuries or
sickness”, within the meaning of section 104(a)(2), as
interpreted by the Supreme Court.
We agree with respondent that the backpay and the interest
on the backpay awarded by the MSPB were not attributable to any
personal injuries or sickness suffered by Mrs. Campbell. Because
we find that the payment in question was not received by Mrs.
Campbell “on account of personal injuries or sickness”, as
required by section 104(a)(2) and the second prong of the Supreme
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