though I do believe the change was made in 1986, not 1996
Au contrair mon cherie.
This from Murphy
Section 104(a) (“Compensation for injuries or sickness”) provides that “gross income [under § 61 of the IRC] does not include the amount of any damages (other than punitive damages) received ··· on account of personal physical injuries or physical sickness.” 26 U.S.C. § 104(a)(2). Since 1996 it has further provided that, for purposes of this exclusion, “emotional distress shall not be treated as a physical injury or physical sickness.” Id. § 104(a). The version of § 104(a)(2) in effect prior to 1996 had excluded from gross income monies received in compensation for “personal injuries or sickness,” which included both physical and nonphysical injuries such as emotional distress. Id. § 104(a)(2) (1995); see United States v. Burke, 504 U.S. 229, 235 n. 6, 112 S.Ct. 1867, 119 L.Ed.2d 34 (1992) (“ § 104(a)(2) in fact encompasses a broad range of physical and nonphysical injuries to personal interests”). In Commissioner v. Schleier, 515 U.S. 323, 115 S.Ct. 2159, 132 L.Ed.2d 294 (1995), the Supreme Court held that before a taxpayer may exclude compensatory damages from gross income pursuant to § 104(a)(2), he must first demonstrate that “the underlying cause of action giving rise to the recovery [was] ‘based upon tort or tort type rights.’ ” Id. at 337, 115 S.Ct. 2159. The taxpayer has the same burden under the statute as amended. See, e.g., Chamberlain v. United States, 401 F.3d 335, 341 (5th Cir.2005).
I wonder where this issue will ultimately land.
If I had to hazard a guess, I'd say...
Supreme Court? |
