Taxation of Damage Awards for Emotional Distress Affirmed

August 14, 2007 The Legal Intelligencer

On a rehearing by the same three-judge panel that originally issued a contrary decision, the D.C. Circuit Court of Appeals recently reversed itself in Murphy v. Internal Revenue Service and held that awards for emotional distress are subject to tax and the taxation of such awards is within the taxing authority granted Congress under Article I, Section 8 of the U.S. Constitution.