Sunday, November 13, 2011
This Note considers the current treatment and application of the § 104(a)(2) exclusion in the context of a recent case, Stadnyk v. Commissioner. In Stadnyk, the Sixth Circuit ruled that the exclusion did not apply to a settlement amount based on a claim of false imprisonment. In Part II, this Note will outline the history of the § 104(a)(2) exclusion and then describe the Stadnyk decisions by the Tax Court and the Sixth Circuit. Part III will provide analysis of these decisions as well as the actions of the legislature, the IRS, and other courts with respect to the § 104(a)(2) exclusion, and will then consider options for improvement. In Part IV, this Note will conclude.