Physical Injury and Sickness Payments
Response to the following problem:
For each taxpayer, discuss how much (if any) of the payments received during the year are included in gross income.
a. Anne sued her employer for discrimination and was awarded $50,000.
b. Todd was physically injured on the job. He is reimbursed $16,400 for medical expenses he paid as a result of his injuries. Todd's employer paid 100% of the premiums on his health insurance policy
c. Meg was physically injured on the job. She received $12,000 of workers' compensation.
d. Sandra had an adverse reaction to the drug her doctor prescribed. She sued the drug company and was awarded $12 million. Of this amount, $11.5 million was for punitive damages.