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B. Section 104
It is well established that, pursuant to section 61(a),
gross income includes all income from whatever source derived
unless otherwise excluded by the Internal Revenue Code. See
Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429-431 (1955).
Exclusions from gross income are construed narrowly.
Commissioner v. Schleier, 515 U.S. 323, 327-328 (1995).
The Small Business Job Protection Act of 1996 (SBJPA), Pub.
L. 104-188, sec. 1605, 110 Stat. 1838, amended section 104, as
relevant here, to provide:
SEC. 104. COMPENSATION FOR INJURIES OR SICKNESS.
(a) In General.--Except in the case of amounts
attributable to (and not in excess of) deductions
allowed under section 213 (relating to medical, etc.,
expenses) for any prior taxable year, gross income does
not include--
* * * * * * *
(2) 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;
* * * * * * *
* * * For purposes of paragraph (2), emotional distress
shall not be treated as a physical injury or physical
sickness. * * *
Section 104 as amended by the SBJPA generally is effective for
amounts received after August 20, 1996. SBJPA sec. 1605(d), 110
Stat. 1839.
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