(Bench Opinion)
 NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being
done in connection with this case, at the time the opinion is issued.  The
syllabus constitutes no part of the opinion of the Court but has been prepared
by the Reporter of Decisions for the convenience of the reader.  See United
                                                                     ______
States v. Detroit Lumber Co., 200 U. S. 321, 337.
______    ___________________

                       SUPREME COURT OF THE UNITED STATES

                                    Syllabus

                    O'GILVIE ET AL., MINORS v. UNITED STATES
                                           ____

     CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

           No. 95-966.   Argued October 9, 1996 - Decided December 10,
                                1996 (Ftnote. *)
                                     (Ftnote. *)

Petitioners, the husband and two children of a woman who died of toxic shock
 syndrome, received a jury award of $1,525,000 actual damages and $10 million
 punitive damages in a tort suit based on Kansas law against the maker of the
 product that caused decedent's death.  They paid federal income tax insofar as
 the award's proceeds represented punitive damages, but immediately sought a
 refund.  Procedurally speaking, this litigation represents the consolidation
 of two cases brought in the same Federal District Court: the husband's suit
 against the Government for a refund, and the Government's suit against the
 children to recover the refund that the Government had made to the children
 earlier.  The District Court found for petitioners under 26 U. S. C.
 S104(a)(2), which, as it read in 1988, excluded from "gross income," the
 "amount of any damages received . . . on account of personal injuries or sick-
 ______________________________________________________________________________
 ness."  (Emphasis added.)  The court held on the merits that the italicized
 ______
 language includes punitive damages, thereby excluding such damages from gross
 income.  The Tenth Circuit reversed, holding that the exclusionary provision
 does not cover punitive damages.

Held:
_____
   1.  Petitioners' punitive damages were not received "on account of" personal
                                                       _______________
 injuries; hence the gross-income-exclusion provision does not apply and the
 damages are taxable.  Pp. 2-11.
    (a) Although the phrase "on account of" does not unambiguously define
 itself, several factors prompt this Court to agree with the

                    
____________________

   *)  Together with No. 95-977, O'Gilvie v. United States, also on certiorari
   *)                            ________    ______________
to the same court.
                                                                    I           

II                          O'GILVIE v. UNITED STATES
                                    ____

                                    Syllabus

 Government when it interprets the exclusionary provision to apply to those
 personal injury lawsuit damages that were awarded by reason of, or because of,
 the personal injuries, and not to punitive damages that do not compensate
 injury, but are private fines levied by civil juries to punish reprehensible
 conduct and to deter its future occurrence.  For one thing, the Government's
 interpretation gives the phrase "on account of" a meaning consistent with the
 dictionary definition.  More important, in Commissioner v. Schleier, 515 U. S.
                                            ____________    _________
 ___, this Court came close to resolving the statute's ambiguity in the
 Government's favor when it said that the statute covers pain and suffering
 damages, medical expenses, and lost wages in an ordinary tort case because
 they are "designed to compensate . . . victims," id., at ___, n. 5, but does
                                                  ____
 not apply to elements of damages that are "punitive in nature," id., at ___. 
                                                                 ____
 The Government's reading also is more faithful to the statutory provision's
 history and basic tax-related purpose of excluding compensatory damages that
 restore a victim's lost, nontaxable "capital."  Petitioners suggest no very
 good reason why Congress might have wanted the exclusion to have covered these
             ___
 punitive damages, which are not a substitute for any normally untaxed personal
 (or financial) quality, good, or "asset" and do not compensate for any kind of
 loss.  Pp. 2-8.   
    (b) Petitioners' three arguments to the contrary - that certain words or
 phrases in the original, or current, version of the statute work in their
 favor; that the exclusion of punitive damages from gross income may be
 justified by Congress' desire to be generous to tort victims and to avoid such
 administrative problems as separating punitive from compensatory portions of a
 global settlement or determining the extent to which a punitive damages award
 is itself intended to compensate; and that their position is supported by a
 1989 statutory amendment that specifically says that the gross income
 exclusion does not apply to any punitive damages in connection with a case not
 involving physical injury or sickness - are not sufficiently persuasive to
 overcome the Government's interpretation.  Pp. 8-11.
   2.  Petitioners' two case-specific procedural arguments - that the
 Government's lawsuit was untimely and that its original notice of appeal was
 filed a few days late - are rejected.  Pp. 12-14.

66 F. 3d 1550, affirmed.

 BREYER, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and
STEVENS, KENNEDY, SOUTER, and GINSBURG, JJ., joined.  SCALIA, J., filed a
dissenting opinion, in which O'CONNOR and THOMAS, JJ., joined.