U.S. Appeals Court Affirms Tax Court’s Ruling Deeming Settlement Payment Taxable

The U.S. Court of Appeals for the Ninth Circuit affirmed the Tax Court’s judgment that a settlement payment received by the taxpayer was not excludable from gross income and that assessing a penalty was proper. The taxpayer, an individual, received a payment as part of a settlement agreement. The Tax Court concluded that the payment was not excludable from the taxpayer’s gross income because there was no direct causal link between the settlement and personal physical injuries or physical sickness, and the taxpayer failed to demonstrate that any other exclusion applied. The court held that the Tax Court correctly determined ...