Tax,
Civil Litigation
Nov. 3, 2021
Tax-free physical sickness or taxable emotional distress?
Section 104 of the Internal Revenue Code shields damages for personal physical injuries and physical sickness from taxes, but the Internal Revenue Service has not defined “physical.”





Robert W. Wood
Managing Partner
Wood LLP
333 Sacramento St
San Francisco , California 94111-3601
Phone: (415) 834-0113
Fax: (415) 789-4540
Email: wood@WoodLLP.com
Univ of Chicago Law School
Wood is a tax lawyer at Wood LLP, and often advises lawyers and litigants about tax issues.
Section 104 of the Internal Revenue Code shields damages for personal physical injuries and physical sickness from taxes, but the Internal Revenue Service has not defined "physical." The IRS is rigid in most cases, and nowhere is that rigidity clearer than in employment cases. If you sue your employer for sexual harassment involving rude comments or even fondling, that is not physical enough for the IRS. But the Tax Court has allowed some employment lawsuits partial t...
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