Mr. Wun's Case: The Schleier Case
2. The portion of settlement that is exempt from taxation
The Schleier case further discusses “on account of personal physical injury” cited in code section 104(a)(2). Ultimately, settlements that can be considered “on account of personal physical injuries” would allow amounts related to medical pain/injury and suffering related to damages, and lost wages excluded from being taxed and exempt under Section 104. By meeting the requirements of Code Section 104(a)(2), Ms. Wun is able to exclude $60,000 from taxable income that relates to her medical injuries. She suffered $40,000 related to medical injuries in addition to $20,000 in future medical bills and emotional distress relates to the actual physical assault.
While, a Private Letter Ruling cannot be used as relevant authority, Ms. Wun’s case is very similar to the facts in Private Letter Ruling 200041022. In this specific Private Letter Ruling, a taxpayer is physically assaulted by a colleague which resulted in the taxpayer to suffer extreme pain. The taxpayer later terminated her employment and filed a lawsuit relating to discrimination and physical injury. The ruling notes that while the taxpayer suffered extreme pain, there were no observable marks on the …show more content…
In Robinson v. Commissioner, 102 T.C. 116 (1994), the Tax Court noted that if a settlement agreement lacked a statement of which claims the payment was meant to settle, the intent of the payor is key in determining how the allocation of the settlement should be made.” Ms. Wun’s legal documents depicts Ms. Wun was original suing for both a violation of Civil Rights and a claim for civil assault/battery. The Civil Rights claim would’ve awarded Ms. Wun punitive damages regarding the violation of Title VII Civil Rights Act. The civil assault and battery claim would’ve awarded Ms. Wun both compensatory damages and punitive
The Schleier case further discusses “on account of personal physical injury” cited in code section 104(a)(2). Ultimately, settlements that can be considered “on account of personal physical injuries” would allow amounts related to medical pain/injury and suffering related to damages, and lost wages excluded from being taxed and exempt under Section 104. By meeting the requirements of Code Section 104(a)(2), Ms. Wun is able to exclude $60,000 from taxable income that relates to her medical injuries. She suffered $40,000 related to medical injuries in addition to $20,000 in future medical bills and emotional distress relates to the actual physical assault.
While, a Private Letter Ruling cannot be used as relevant authority, Ms. Wun’s case is very similar to the facts in Private Letter Ruling 200041022. In this specific Private Letter Ruling, a taxpayer is physically assaulted by a colleague which resulted in the taxpayer to suffer extreme pain. The taxpayer later terminated her employment and filed a lawsuit relating to discrimination and physical injury. The ruling notes that while the taxpayer suffered extreme pain, there were no observable marks on the …show more content…
In Robinson v. Commissioner, 102 T.C. 116 (1994), the Tax Court noted that if a settlement agreement lacked a statement of which claims the payment was meant to settle, the intent of the payor is key in determining how the allocation of the settlement should be made.” Ms. Wun’s legal documents depicts Ms. Wun was original suing for both a violation of Civil Rights and a claim for civil assault/battery. The Civil Rights claim would’ve awarded Ms. Wun punitive damages regarding the violation of Title VII Civil Rights Act. The civil assault and battery claim would’ve awarded Ms. Wun both compensatory damages and punitive