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


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