Taxing emotional distress damages held unconstitutional.

• Position: IRS Update

The Circuit Court for the District of Columbia Circuit in Marrita Murphy decided Aug. 22 that IRC Sec. 104(a)(2), which only excludes from gross income non-punitive damages for personal physical injuries or sickness, is unconstitutional as applied to damages for emotional distress or mental anguish and injury to professional reputation because these damages were unrelated to lost wages or earnings, or for diminished earning capacity or otherwise in lieu of...