The Washington D.C. Federal Circuit Court of Appeals invalidated the federal income tax provisions that taxed a plaintiff’s recovery for non-physical injuries. Section 104(a)(2) has been ruled unconsitutional. In a unanimous opinion, written by Chief Judge Douglas Ginsburg, the Court determined that compensation for nonphysical injuries was tantamount to a restoration of human capital which is entirely different than income. Added in was the thought that the 16th Amendment to Constitution did not contemplate such recovery to be considered as income.
Expect an appeal, if the Supreme Court will hear the case.
The case is Marrita Murphy v. Internal Revenue Service, (No. 05-5139) (United States Court of Appeals for the District of Columbia Circuit).
Contact the Author: Christopher M. Ernst
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