While jogging in July, Daniel was accidently struck by a delivery van and injured. After being hospitalized for 3 days, he was released – very bruised but with no permanent impairment. The driver of the van was arrested and ticketed by police for reckless operation of a vehicle and was later prosecuted for drug use. To avoid any adverse publicity of a lawsuit, the owner of the delivery service paid Daniel’s medical expenses of $5,000 directly to the hospital and sent him a $50,000 check on September 1, 2017. The check stated that “$50,000 is a settlement in full for physical injuries sustained.” Daniel accepted the settlement and cashed the check. He incurred no legal expenses relating to this settlement.
Question
How should Daniel treat the receipt of $ 50000 check and $ 5000 paid towards his medical expenses on his tax return?