No Tax On Injury Awards

The federal government may not tax the money plaintiffs receive as compensation for emotional distress and other intangible injuries, a federal appeals court said Tuesday.

The U.S. Court of Appeals for the D.C. Circuit struck down as unconstitutional a portion of the tax code that said only compensation for physical injuries is tax exempt.

This only applies in the District of Columbia. Nevertheless, It is possible the IRS may accept this interpretation for other states.

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