T.C. Sum m ary Opi ni on 20 14 -9 3

UNITED STAT ES TAX COURT

JOSHUA SM ITH, Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 24 63 5- 12 S. Fi le d S ep te m be r 18 , 20 14
.
Jo sh uaSm ith, fo r hi m se lf. Erin K. Neug eb au er, fo r res po nd en t.

SUMM ARY OPINION GUSTAFSON, Ju dg e: Thi s ca se was h eardpu rs ua ntto th e p ro vi si on s o f
se ct io n 7 46 3 ineffe ctwhenth e p et it io n was fil ed . Purs ua ntto sec ti on 74 63 (b ),

1

All sec ti on refe ren ces are t o t he Int ern al Rev enue Co de (26 U.S.C.) in 1 effe ctforth e y ear i n i ss ue , andall Ru le refe ren ces are t o t he Tax C ourt Rul es of Prac ti ce an d P ro cedur e, un le ss ot he rwis e in di cat ed
.- 2 -

th e d eci si on to be en te redis no t re vi ewab le by any ot he r co urt, an d t hi s o pi ni on sh al l n otbe tre at edas p rece de ntforan y ot he r cas e. The In te rn al Rev enue Serv ic e (“ IRS” ) de te rm in eda de fic ie nc y of $ 7,7 05 in
an d asec ti on66 62 (a) a ccuracy-rela te d p en al ty of $1 ,54 1 o n p et it io ne r Jo shua Sm ith’s Fe de ral in co m e ta x fo r 20 10 . This cas e ari se s fr om Mr. Sm ith’s t im el y pe ti ti on forred et erm in at io n o f th e ta x a ndpe na lt ie s i n the st atut ory no ti ce o f de fic ie nc y . Res po nd en t h as co nc ed edth atth e unr ep orte d i nc om e atis su e is no t s ub ject to sel f-em

pl oym en t t ax . Add it io na ll y , res po nd en t h as co nc ed edth atMr. Sm ith i s no t l iabl e fo r th e co rres po nd in g s ect io n 6 66 2( a) ac cu racy-rela te d p en al ty of $1 ,54 1. Thus , th e o nl y

is su e rem ai ni ng forde ci si on is whet he r th e unr ep orte d in co m e atis su e was a se tt le m en t p aym en t fo r ph y si cal in juri es or p hysic al si ckne ss an d t he refo re ex cl ud ab le fro m Mr. Sm ith’s g ro ss in co m e und er s ect io n 1 04 (a)( 2)
. W e h ol d t ha t i t was no t. Bac kg ro un d The pa rti es joi nt ly m ov edto subm itth is cas e fo r co ns id erat io n p ur su an t t o Ru le 12 2, re fle ct in g t he ir a gr eem en t tha t the rel ev an t fa ct s co ul d b e p res en te d- 3 -

witho uta tr ia l, an d we g ran te d t ha t m ot io n. W e in co rp or at e b y th is refe ren ce the 2 pa rti es ’ st ip ul at io n o f fac ts fil edApri l 7 , 20 14 , andth e ex hi bi ts att ach edth eret o. 3 Mr. Sm ith re si de d i n t he Sta te of P en ns y lv an iawhen he fil edhi s p et it io n. Mr. Sm ith’s d ia gn os is Mr. Sm ith was form erl y

em pl oyed as a se rv er wi th MBFGM TW Lim it ed Part ne rs hi p d .b.a. M on te rey Bay Fish Grot to (“ MBF G”) fro m ap pr ox im at el y

Ju ne 30 , 20 05 , un ti l M BFG t erm in at edhi s emplo ym en t o n J anuary 30 , 20 07 . Whi le he
was em pl oyed b y MBFG, M r. Sm ith was di ag no se d wi th att en ti on de fic it hypera ct iv ity

di so rd er (“ ADHD”) an d m ajorde pr es si ve di so rd er (“ MDD”). Bo th ADHD andMDD are d is ab il it ie s wi th in th e d efi ni ti on of “ di sabi li ty” inth e Am eri can s wi thDis ab il it ie s Actof 1 99 0 (“ ADA”), Pub. L. No. 1 01 -3 36 , 10 4 S ta t. 32 7. As p artof h is tre atm en t re gi m enhe was p res cri be d ast im ul an t m ed ic at io n cal le d Des ox yn (metha m

ph et am in e hy dr oc hl or id e). One of De so xyn’s si de effe ct s The bu rd enof p ro of

is ge ne ral ly on the tax pa y er, s ee Ru le 14 2( a), an d the 2 subm is si on of acas e und er Ru le 12 2 d oe s n otalt er tha t b ur de n, s ee Bo rch ers v. Co m m is si on er, 9 5 T.C. 8 2, 9 1 (1 99 0) , aff’d, 9 43 F.2d22 (8th C ir. 1 99 1) ; Ru le 12 2( b)
. The st ip ul at edreco rdco ns is ts of: th e fac ts all eg edinMr. Sm ith’s p et it io n

3 fil edwith thi s C ou rt o n Oct ob er 5 , 20 12 , to th e ex te ntth ey are ad m it te d i n res po nd en t’s an swe r fi le d o n No ve m be r 30 , 20 12 ; the st ip ul at io n o f fac ts ; an d the ex hi bi ts att ach edth eret o.- 4 -

is ap pe ti te supp res si on . This was p ro bl em at ic for Mr. Sm ith, wh o i s s m al l i n st atur e. He is on ly five feetsi x i nc he s t al l, an d h is weig htflu ctua te d b etween12 0
an d 1 40 po un ds be fo re h e b eg antak in g t he m ed ic at io n. Mr . Sm ith’s p rimary care ph y si ci anwas c on cern edab ou t the ap pe ti te supp res si ve effe ct s o f Des ox yn o n h is ge ne ral ph y si cal an d m en ta l h eal th , parti cu larly if h e lo stan y weig ht . As a res ul t, th e p hysic ian re co m

m en de d t ha t h e co ns um e as m an y cal or ie s as po ss ib le whe ne ve r he was abl e to do so . MBF G’ s emplo y ee m eal po li cy Thi s m ed ic al advi ce co nf li ct edwith M BFG’s lo ng st an di ng po li cy pr oh ib it in g s erv ers fro m

eat in g dur in g ash ift . The o nl y ex cep ti on th atMBFG al lo wedto th e p ol ic y

was tha t a f

oo d s erv er co ul d e atif l es s tha n 3 0 m in ut es rem ai ne d b efo re the res taur an t s to pp edsea ti ng gu es ts , andif tha t s erv er h adno gu es ts rem ai ni ng at h is or h er as si gn edtab le s. Fi rs t an d s eco ndvi ol at io ns of t he po li cy res ul te d i n wri tt enwarn in gs , whi le a th irdvi ol at io n re su lt edinterm in at io n of th e se rv er’s em

pl oym en t. Mr. Sm ith re co gn iz edth e te ns io n b etweenhi s p hysic ian’s re co m m en de d eat in g re gi m e an d M BFG’s res tri ct iv e m eal po li cy . He in fo rm edMBFG o f hi s di sabi li ty andreque st edto be ex cep te d fr om th e p ol ic y . For abri ef p eri od , MBFG- 5 -

in it ia ll y ex cep te d M r. Sm ith fr om th e p ol ic y

an d h e was pe rm it te d t o e atwitho ut
res tri ct io ns as h is ap pe ti te de m an de d. Howev er, m an ag em en t’s p at ie nc e wit h M r. Sm ith’s ac co m m od at io n qui ck ly
wan ed , andon Jan ua ry

30 , 20 06 , Mr. Sm ith was in fo rm edth atMBFG wo ul d n o lo ng er ac co m

m od at e h is di sabi li ty andth athe was a ga in subjec t t o t he m eal po li cy . At th atm eet in g M BFG ex pl ai ne d t he term s o f th e m eal po li cy to Mr. Sm ith a s fo ll ows : Mr . Sm ith was pe rm it te d t o t ak e up t o two ei gh t-minu te bre ak s pe r sh ift , bu t o nl y

aft er fi rs t re cei vi ng pe rm is si onfro m th e m an ag er; Mr. Sm ith
was pe rm it te d t o e aton ly pre-p rep aredfoo d t ha t was bo ug htou ts id e th e res taur an t; an d M r. Sm ith was pe rm it te d t o c on su m e h is foo d o nl y whi le st an di ng in a pa rti cu lar lo cat io n i n t he ki tc he n, i n fu ll vi ew of all ki tc he n e m

pl oyees. Les s th antwo week s l at er, Mr . Sm ith was cal le d t o am eet in g wi thMBFG m an ag em en t
an d d is ci pl in edforvi ol at in g t he m eal po li cy . He was t ol d t ha t h e wou ldbe te rm in at edif h e v io la te d t he m eal po li cy ag ai n. Adm in is tra ti ve co m

pl ai ntan d Di st ric t Co urt l aws ui t Mr. Sm ith s ub m it te d aqu es ti on na ire to th e Pen ns y lv an iaHum anRel at io ns Co m m is si on (“ PHRC” ) on Feb ru ary 16 , 20 06 , all eg in g t ha t M BFG h aden ga ge d i n di sc riminat ory

co nduc t. The fol lo win g d ay Mr. Sm ith n ot ifi edMBFG i n wri ti ng of hi s d eci si on to pu rs ue form al ch arg es of d is cri m in at io n a s a r es ul t o f it s m eal- 6 -

po li cy , ret al ia to ry

co nduc t, an d re fu sa l t o a cco m m od at e h is di sabi li ty. On Jul y 21 , 20 06 , th e PHRC di sm is se d M r. Sm ith’s co m pl ai ntbe cau se th e co m

pl ai ntdi d n ot
es tabl is h p ro babl e cau se to sh ow d is cri m in at io n. MBF G term in at edMr. Sm ith o n J anuary 30 , 20 07 . In re sp on se to hi s te rm in at io n, M r. Sm ith fi le d o n J ul y 24 , 20 07 , a civ il laws ui t ag ai ns t M BFG i n the U.S. Dis tri ctCo urt fo r th e Weste rnDis tri ctof P en ns y lv an ia , Civ il No. 0 7- 01 03 2, pu rs ua ntto th e ADA andth e Pen ns y lv an iaHum anRel at io ns Act, 4 3 P a. Co ns . St at . sec s. 9 51 -9 63 (W es t 2 00 9) . In the laws ui t M r. Sm ith a ll eg edth atMBFG di sc riminat edan d re ta li at edag ai ns t h im be cau se of h is di sabi li ty. Mr. Sm ith al le ge d t ha t h e su ffer edem ot io na l d is tre ss , anx ie ty, de pr es si onan d o th er co ns eque nt ia l d am ag es . Mr. Sm ith’s am en de d c om pl ai ntfil edNov em

be r 19 , 20 07 , st at ed : “ As a d ire ctan d p ro xi m at e res ul t o f de fen da nt ’s act io ns to ward Pl ai nt iff , as d es cri be d h erei n, Pl ai nt iff ha s s uf fere d, an d wi ll co nt in ue to su ffer , se ve re em ot io na l d is tre ss , anx ie ty, de pr es si on an d o th er co ns eque nt ia l d am ag es .” Set tl em en t o f th e d is cri m in at io n c la im s InMarc h 2 01 0 M r. Sm ith a ndMBFG e xe cu te d a“ Co nf id en ti al Set tl em en t Agr eem en t an d Gen eral Rel eas e”. The set tl em en t ag reem en t d es cri be d Mr. Sm ith’s cl ai m s as fol lo ws:- 7 -

[Mr . Sm ith] * * * d oe s h ereb y ful ly andfor ev er re le as e, di sc ha rg e an d ho ldha rm le ss MBFG * * * fro m an y an d a ll li ab il ity

up on cla im s, cau se s o f act io n o r ob li ga ti on s o f ev ery na tu re wh at so ev er, wh ethe r kn own or u nkno wn, ar is in g o utof o r rel at in g t o h is em pl oym en t an d te rm in at io n fr om

em pl oym en t o r to any

ot he r act , eve nt , fai lu re t o a ct orth in g wh ic h h as oc cu rredor wa s cr eat edat a ny tim e b efo re the date on whi chth is Agre em en t i s s ig ne d. With ou t l im it in g t he ge ne ral ity he reo f, th is rel eas e co ve rs cla im s o r cau se s o f act io n b as edup on to rts (s uc h a s, fo r ex am

pl e, ne gl ig en ce, fraud , def am at io n, wro ng fu l di sc harg e); ex pr es s an d i m pl ie d c on tra ct s; fed eral , st at e o r lo cal st atut es an d o rd in an ces , in cl ud in g t ho se whi chreg ul at e em pl oym en t pr act ic es (su chas, fo r ex am pl e, The Age Di sc riminat io n i n Em pl oym en t Actof 1 96 7, Th e Am eri can[si c] with Dis ab il it ie s Act , Tit le VII of

th e Ci vi l Ri gh ts of 1 96 4, the Pen ns y lv an iaHum an Rel at io ns Act) ; an d e ve ry ot he r so ur ce o f le ga l ri gh ts an d o bl ig at io ns wha ts oe ve r. Thi s d es cri pt io n i nc lu de s n o s pe ci fic m en ti on of p hysic al in jury or si ckne ss . In th is set tl em en t ag reem en t, MB FG ag reedto pa y $3 5,0 00 inex ch an ge forMr. Sm ith’s re le as e an d d is ch arg e o f an y cla im s o r cau se s o f act io n h e h adag ai ns t MBF G. Mr. Sm ith a ndMBFG’s ag reem en t al lo cat edth e se tt le m en t p aym en t as fo ll ows : Pl ai nt iff ha s re qu es te d, an d t he pa rti es ha ve ag reed , th atFiv e Tho us an d Do ll ars of t he to ta l p aym en t b e al lo cat edto lo stwage s. MBF G sh al l re po rt thi s p orti on of t he pa ym en t t o the Int ern al Rev enue Serv ic e th ro ug h a n IR S Fo rm W -2 an d s uc h p aym en t s ha ll be subjec t t o app li cab le em pl oym en t t ax withh ol di ng s. Pl ai nt iff ha s reque st ed , andth e p art ie s h av e ag reed , th atth e rem ai nd er o f th e su m be all oc at edto pa inan d s uf feri ng , em ot io na l d is tre ss an d t he ex pe ns e of su it . This po rti on sh al l b e rep orte d t o the Int ern al Rev enue Serv ic e th ro ug h an IR S Fo rm

10 99 . [Em

ph as is ad de d.]- 8 -

The set tl em en t ag reem en t al so pro vi de d t ha t M r. Sm ith was “ so le ly resp on si bl e fo r th e ta x l iabi li ti es du e fro m hi m , if an y , whi chres ul t fr om hi s re cei ptof m on ey un de r th is Agre em en t” . MBFG i ss ue d M r. Sm ith aFo rm 10 99 -MI SC,

“ Mi sc el lane ou s In co m e”, an d re po rte d t he $3 0,0 00 of n on em pl oyee co m

pe ns at io n pa idto hi m

du rin g t ax y ear 2 01 0. Mr . Smith d idno t re po rt t he $3 0,0 00 of
no ne m pl oyee co m

pe ns at io n o n h is 20 10 Fed eral in co m e ta x re tu rn . On J ul y 2, 2 01 2, the IRS m ai le d M r. Sm ith t he no ti ce o f de fic ie nc y , whi ch de te rm in eda de fic ie nc y

intax of $ 7,7 05 , andon Octo be r 5, 2 01 2, M r. Sm ith fi le d hi s p et it io n i n t hi s C ou rt. OnApri l 7 , 20 14 , th e p art ie s fi le d t he ir s ti pu lati onof fact s an d jo in tl y

m ov edto subm itth e cas e und er Ru le 12 2. By ord er d at edApri l 7, 2 01 4, the Co urt o rd eredth e p art ie s t o s ub m itsi m ul tane ou s m em or an dabri efs by Ju ly 7, 20 14 . Mr. Sm ith d idno t fi le a br ie f, bu t we co ns tru e h is po si ti on to be th at th e unr ep orte d i nc om e is ex cl ud ab le fro m hi s g ro ss in co m e p ur su an t t o s ect io n 10 4( a)(2 ) be cau se itwas a ll oc at edto pa in an d s uf feri ng . Res po nd en t’s b rie f arg ue s tha t the un rep orte d i nc om e rep res en ts set tl em en t p ro ceed s tha t wer e n ot
rece iv edon acco un t o f pe rs on al ph y si cal in juri es or p hysic al si ckne ss an d th eref or e are no t ex cl ud ab le fro m gro ss in co m e und er s ect io n 1 04 (a)( 2)
.- 9 - Dis cu ss io n As a g en eral rul e, th e IRS ’s det erm in at io ns are p res um edco rrec t, an d t he ta xp ay er h as th e b ur de n o f es tabl is hi ng th atth e d et erm in at io ns inth e n ot ic e o f de fic ie nc y

are erro ne ou s. Ru le 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. 11 1, 1 15 (1 93 3) . Mr. Sm ith h as no t co nt en de d t ha t the burd enof p ro of ha s s hi fte d p ur su an t to sec ti on 74 91 (a), an d t he reco rdsh ows no ba si s fo r su cha co nt en ti on . The
reco rdsh ows th atMr. Sm ith d idrece iv e th e unr ep orte d i nc om e; th us , th e pr es um pt io n o f co rrec tn es s at ta ch es inth is un rep orte d i nc om e cas e. See, e.g ., Harri s v . Comm is si on er, T.C. Mem o. 2 01 2- 33 3. I. Tax ab il ity

of s et tl em en t awa rd s Sect io n 6 1( a) p ro vi de s the fol lo win g b ro adde fin it io n o f th e te rm “ gr os s in co m e”: “ Exc ep t as othe rwis e p ro vi de d i n t hi s s ub ti tl e, gr os s i nc om e m ean s al l in co m e fro m

what ev er s ource d eri ve d” . Sect io n 6 1( a) i s thu s b ro adinit s s co pe , an d e xc lu si on s fr om

gro ss in co m e m

us t b e n arro wly co ns tru ed . Comm is si on er v . Sch le ie r, 51 5 U.S. 3 23 , 32 8 (1 99 5)
. Sect io n 1 04 (a) p ro vi de s tha t g ro ss in co m e d oe s n otin cl ud e:

(2 ) th e am ou ntof a ny dam ag es (ot he r th anpu ni ti ve da m ag es ) rec ei ve d (wh ethe r by su itor a gr eem en t an d wh ethe r as lu m p s um s o r as pe rio di c p aym en ts ) on acco un t o f pe rs on al ph y si cal in

juri es or p hysic al si ckne ss * * *.- 10 - * * * * * * * Fo r pu rp os es of p arag rap h (2 ), em ot io na l d is tre ss sh al l n otbe tre at ed as a ph y si cal in

jury or ph y si cal si ckne ss . The p rece di ng sen te nc e sh al l n otap pl y

to anam ou ntof d am ag es no t i n e xc es s o f th e am ount pa idfor m ed ic al care (de sc rib edinsubp arag rap h (A) or ( B) o f se ct io n 21 3( d) (1 )) at tri bu tabl e to em ot io na l d is tre ss . The leg is la ti ve hi st ory

sh ows th at“ [i]t i s i nt en de d t ha t the term em ot io na l d is tre ss in cl ud es sym

pt om s (e .g., i ns omni a, he ad ach es , st om ach di so rd ers ) whi chm ay res ul t fr om

su chem ot io na l d is tre ss ”. H.R. Con f. Rep t. No . 10 4- 73 7, at30 1 n .56 (1 99 6) , 19 96 -3 C.B. 7 41 , 10 41 . There fo re, t o b e ex cl ud ab le fro m gro ss in co m e un de r se ct io n 1 04 (a)( 2) , a se tt le m en t awa rdm us t b e p ai d t o atax pay er o n a cco un t of ph y si cal in

juri es or p hysic al si ckne ss , whi chdo es no t i nc lu de em ot io na l d is tre ss orsym pt om s the reo f. Whe re d am ag es are re cei ve d p ur su an t t o aset tl em en t ag reem en t l ik e Mr. Sm ith’s, the na tu re o f th e cl ai m th atwas the actua l b as is for set tl em en t
co nt ro ls whet he r th os e d am ag es are ex cl ud ab le un de r se ct io n 1 04 (a)( 2) . Uni te d St at es v. Bu rk e, 50 4 U.S. 2 29 , 23 7 (1 99 2) . Whe th er the set tl em en t p aym en t i s ex cl ud ab le fro m

gro ss in co m e und er s ect io n 1 04 (a)( 2) de pe nd s o n t he na tu re an d th e ch arac te r of

th e cl ai m s as se rte d i n t he laws ui t. See Ben t v . Comm is si on er, 87 T.C. 23 6, 2 44 (19 86 ), aff’d, 8 35 F.2d67 (3dCir . 19 87 ); C hu rchv. Co m m is si on er, 8 0 T.C. 1 10 4, 1 10 6- 11 07 (19 83 ); Gl ynn v. Co m m is si on er, 7 6 T.C.- 11 -

11 6, 1 19 (19 81 ), aff’d wi th ou t p ub li sh edop in io n, 6 76 F.2d68 2 (1 stCir . 19 82 ). The de te rm in at io n o f th e und erl y in g n atur e o f th e cl ai m is factua l. Ro bi ns on v. Co m m is si on er, 1 02 T.C. 11 6, 1 26 (19 94 ), aff’d i n p art , rev ’d inpa rt, and
rem an de d o n a no th er i ss ue , 70 F.3d34 (5t h C ir. 1 99 5) ; Se ay v. Co m m is si on er, 5 8 T.C. 32 , 37 (19 72 ). Whe re the re i s a s et tl em en t ag reem en t, the de te rm in at io n o f th e n atur e o f th e cl ai m is us ua ll y

m ad e b y refe ren ce t o t he ag reem en t. See Knu ck le s v . Co m m is si on er, 3 49 F.2d61 0, 6 13 (10 th Cir . 19 65 ), aff’g T.C. Me m o. 1 96 4- 33 ; Ro bi ns on v. Co m

m is si on er, 1 02 T.C. at 1 26 . If th e se tt le m en t ag reem en t l ack s an ex pr es s s ta te m en t o f th e cl ai m s tha t p aym en t was to set tl e, th e in te ntof t he pa y or (h ere, M BFG) i s cr it ic al to th atde te rm in at io n. Knuc kl es v. Co m m is si on er, 3 49 F.2 d a t 6 13 ; s ee al so Agarv. Co m m is si on er, 2 90 F.2d28 3, 2 84 (2dCir . 19 61 ), aff’g p er cu ria m

T.C. Mem o. 1 96 0- 21
. II. The na tu re o f Mr. Sm ith’s cl ai m ag ai ns t M BFG W e su rm is e fro m

Mr. Sm ith’s p et it io n t ha t h is po si ti on is th atth e un rep orte d i nc om e is ex cl ud ab le fro m hi s i nc om e und er s ect io n 1 04 (a)( 2) be cau se itwas p art ia ll y

all oc at edas d am ag es forpa in an d s uf feri ng un de r th e se tt le m en t ag reem en t. (He m ak es no co nt en ti on th atth e am ou nt s wer e fo r m ed ic al care . Cf.
se c. 10 4( a) (fl us h l an gu ag e).) Be cau se th e unr ep orte d i nc om e aro se fro m Mr.- 12 -

Sm ith’s s et tl em en t ag reem en t wi th MBFG, we m us t fi rs t l oo k t o t he set tl em en t ag reem en t t o d et erm in e th e n atur e o f th e cl ai m s i t was in te nd edto set tl e. The
se tt le m en t p aym en t i s ex cl ud ab le fro m gro ss in co m e o nl y

if i t was pa idon acco un t of ph y si cal in

juri es or p hysic al si ckne ss . Alte rn at iv el y , if the set tl em en t p aym en t
was pa idonacco un t o f ge ne ral pa in an d s uf feri ng or e m ot io na l d is tre ss , th enit
wou ldno t b e ex cl ud ab le fro m gro ss in co m e und er s ect io n 1 04 (a)( 2)
. As we h av e n ot ed , th e se tt le m en t ag reem en t d oe s n otsp eci fic al ly m en ti on an y cla im s fo r ph y si cal in

juri es or p hysic al si ckne ss . Andby its term s (quo te d ab ov e), the set tl em en t ag reem en t d oe s n otpro vi de th atan y po rti on of t he pa ym en t
was all oc ab le to cla im s fo r ph y si cal in juri es or p hysic al si ckne ss . Rath er, i t al lo cat es th e p aym en t t o “ lo stwage s” , “pa inan d s uf feri ng , em ot io na l d is tre ss an d th e ex pe ns e o f su it .” Thi s C ourt h as no te d, h owe ve r, th at“ ‘pai n a ndsu ffer in g’ is a br oa d t erm

th atin cl ud es em ot io na l d is tre ss an d i ts sym pt om s” . See Lo ng or iav. Co m m is si on er, T.C. Mem o. 2 00 9- 16 2. Se tt le m en t p aym en ts forno n- ph y si cal in juri es su chas e m ot io na l d is tre ss are n otex cl ud ab le fro m in co m e und er s ect io n 10 4( a)(2 ). See i d.; Hawki ns v. Co m m is si on er, T.C. Mem o. 2 00 7- 28 6, af f’d, 38 6 Fed . App x. 6 97 (9t h C ir. 2 01 0) ; s ee al so Bla ckwoo d v . Commis si on er, T.C. Mem o. 2 01 2- 19 0 (h ol di ng th atde pr es si on is a no n- ph y si cal in jury und er se ct io n 1 04 (a))
.- 13 -

Whe n we l oo k t o M r. Sm ith’s Fe de ral co urt co m pl ai ntto see whet he r it st at es m or e p art ic ul ar cl ai m s (i .e., ph y si cal in juri es or p hysic al si ckne ss ) th at
wou ldjus ti fy

ex cl us io n, s ee Bu rk e, 50 4 U.S. at23 7; Chur chv. Co m m is si on er, 8 0 T.C. at 1 10 6- 11 07 , we fin d i t d oe s n ot . The cl ai m s M r. Sm ith a ss ert edag ai ns t MBF G were fo r di sc riminat io n andret al ia ti on ; an d t he da m ag es Mr. Sm ith cl ai m edwere: “ se ve re em ot io na l d is tre ss , anx ie ty, de pr es si on an d o th er co ns eque nt ia l d am ag es ”. Thes e in juri es are n on -p hysic al . As we h av e p rev io us ly he ld , sec ti on 10 4( a)(2 ) an d the flu sh lan gu ag e o f se ct io n 1 04 (a) re qu ire th at , to be
ex cl ud edfro m

in co m e, an y

da m ag es m

us t ar is e fro m

pe rs on al in

juri es or p ers on al si ckne ss ot he r th anem ot io na l d is tre ss or t he sym pt om s the reo f. See Lo ng or iav. Co m m is si on er, T.C. Mem o. 2 00 9- 16 2. Thus , we can no t h ol d t ha t M r. Sm ith’s cl ai m s fo r da m ag es were fo r ph y si cal in juri es th atm ig htgi ve ris e to a se tt le m en t awardth atis ex cl ud ab le fro m in co m e p ur su an t t o s ect io n 1 04 (a)( 2)
. The ch arac te r of

th e se tt le m en t p aym en t h in ge s u lt im at el y on th e d om in an t
reas onof t he pa y orinm ak in g the pa ym en t. See Agarv. Co m m is si on er, 2 90 F.2d at28 4; Fo no v. Co m

m is si on er, 7 9 T.C. 6 80 , 69 6 (1 98 2) , aff’d wit ho utpubl is he d op in io n, 7 49 F.2d37 (9t h C ir. 1 98 4) . Mr. Sm ith h as no t m ethi s b ur de n t o es tabl is h t ha t h e rec ei ve d t he $3 5,0 00 set tl em en t p aym en t, o r an y id en ti fiabl e p art th ereo f, fro m

MBFG o n a cco un t o f pe rs on al ph y si cal in juri es or p hysic al si ckne ss .- 14 -

Fo r th atreas on we fin d t ha t the $3 0,0 00 of unr ep orte d i nc om e is no t ex cl ud ab le fro m Mr. Sm ith’s g ro ss in co m e und er s ect io n 1 04 (a)( 2) for hi s t ax y ear 2 01 0. To re fle ctth e fo reg oi ng , Deci si on wil l b e en te redun de r Ru le 15 5.