General Rule
tax consequences of p's recovery will turn on underlying claim that produced recovery
Punitive Damages
Gross Income (Glenshaw Glass)
Loan recovery
not Gross income. Interest on loan= Gross Income
Lost Profits
Gross Income.
Property or Goodwill Damages
if recovery> basis= GI to extent of excess
if recovery < basis not Gross Income + reduction in basis
Compensation for Personal Injuries or Sickness 104(a)(2)
GI does not include
amount of damages, other than punitive damages, received on account of personal physical injury or personal sickness
Personal Physical injuries or Physical Sickness
Not Gross Income
Medical Expenses
Limit- for previously deducted expenses
TP must include in GI portion of recovery that represents medical expenses that had previously been deducted under 213
Pain and Suffering
includes recovery for emotional distress if resulting from physical injury
Lost wages due to physical injury
still excluded from GI
recovery for income=GI
does not include damages from
non-physical injuries
Workers Comp
not Gross Income
Payments to Survivors for Job-related deaths
excludible
Accident & Health Insurance Proceeds
policy purchased by taxpayer- proceeds not GI
policy purchased by employer(employer funded medical/health plans
premium is not compensation for employee
Employee generally has no GI when employer pays amounts to provide health insurance coverage or employ