Tax court allows back pay exclusion.
The CPA Journal Online Search Software Personal Help Nov 1991 Tax court allows back pay exclusion. However, damage awards to employees typically include back pay when awards are made under federal discrimination statutes for sex, race, national origin, age, or handicap. The regulations specify that to qualify as a personal injury the taxpayer's claim for damages must be a tort or tort-type claim. Prior to Downey, the Tax Court had accepted the IRS position that back pay damages were more like a contract that a tort claim. The Tax Court had previously held that back pay was taxable even in cases where the taxpayer's claim was partly asserted solely under race, sex, or age discrimination statutes.