Opinion ID: 197050
Heading Depth: 3
Heading Rank: 3

Heading: Interest as Damages On Account of Personal Injuries

Text: 27 The two requirements for determining exclusions under section 104(a)(2) were recently explained in Schleier: 28 First, the taxpayer must demonstrate that the underlying cause of action giving rise to the recovery is based upon tort or tort type rights; and second, the taxpayer must show that the damages were received on account of personal injuries or sickness. 29 Schleier, --- U.S. at ----, 115 S.Ct. at 2167 (emphasis added). Although their underlying causes of action clearly satisfy the first prong, unless the Delaneys are able to make the second crucial showing--that the portion of their settlement recovery attributable to statutory prejudgment interest was received on account of personal injuries or sickness--their claim fails. Id. 30 The second predicate showing necessitates what the Brabson court termed proof that each element of damages was linked to the injury itself. Brabson, 73 F.3d at 1043. 9 The Delaneys utterly failed to preserve any claim that the prejudgment interest component in their settlement recovery was linked to their personal injuries. 10 Id. See also Manzoli v. Commissioner, 904 F.2d 101, 105 (1st Cir.1990). As it is neither necessary nor practicable to do so in this case, see note 10 supra, we do not consider whether statutory prejudgment interest may ever be excludable from gross income under § 104(a)(2), an important question left for another day. III