Tuesday, August 22, 2006

A major change in income taxation...

The DC circuit court ruled today that the IRS cannot tax non-physical personal injury awards. The court ruled in favor of Murphy in Murphy vs. The United States, she was arguing that monies awarded to her due to emotional distress were not income and thus were not taxable under the rules established by the U.S. constitution.

Apparently the court's opinion is that monies awarded for personal injury are actually "return of capital" and that any money awarded was in fact compensation for human capital lost.

Article: TaxProf