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Tort Reform And The Tax Code: An Opportunity To Narrow The Personal Injuries Exemption, Robert C. Illig

Vanderbilt Law Review

The Internal Revenue Code (the "Code") defines income broadly to include wealth from almost every source, while at the same time exempting a number of items for various tax and public policy reasons. One such policy-based exemption is section 104(a)(2)-the Personal Injuries Exemption-which exempts from tax "any damages ... received on account of personal injuries or sickness." The Personal Injuries Exemption, however, exists in a state of disarray and needs amending. Since its inception, this exemption has lacked both clear definitions of its key terms and a sound theoretical foundation. Moreover, although courts traditionally read exemptions narrowly, they have interpreted …