# Miller v. Commissioner > United States Tax Court · September 13, 1989 · 93 T.C. 330 URL: https://www.frixlaw.com/law-library/cases/4486338 ## Case - **Full name:** Bonnie A. Miller v. Commissioner of Internal Revenue - **Court:** United States Tax Court - **Decided:** September 13, 1989 - **Citations:** 93 T.C. 330; 93 T.C. No. 29; 1989 U.S. Tax Ct. LEXIS 125 - **Precedential status:** Published - **Opinion:** Concurrence by Ruwe - **Judges:** Wells,Chabot,Korner,Shields,Clapp,Swift,Jacobs,Gerber,Wright,Parr,Williams,Ruwe,Colvin,Ruwe,Chabot,Swift,Jacobs,Gerber,Wright,Parr,Williams,Wells,Whalen,Hamblen - **Cited by:** 32 later opinions in the Frix Law Library ## Citator (automated) - **Red flag:** Reversed by Commissioner of Internal Revenue v. Bonnie A. Miller, 914 F.2d 586 (1990). - Negative treatments: 1 - Distinguished by: 0 - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4486338 ## How later opinions describe it (automated extraction) - holding that because the jury did not award damages for emotional distress in one case, the parties did not intend the settlement to include payment for emotional distress in a similar case not yet brought to verdict - explaining that an interpretation of the language requiring more, than mere causation is strained and unnatural ## Opinion text RUWE, J., concurring: I agree with Judge Wells’ opinion and wish to add the following comments with regard to the application of section 104(a)(2) to punitive damages. As pointed out by the majority, punitive damages can only be awarded if there is a valid underlying cause of action. In this case, the underlying cause of action is clearly one for personal injury. The existence of a personal injury is the sine qua non for an award of any kind of damages, be they compensatory or punitive. While the primary purpose of punitive damages may well be to deter egregious conduct on the part of a tort-feasor, egregious conduct standing alone will not entitle a claimant to punitive damages. Shell Oil Co. v. Parker, 265 Md. 631 , 291 A.2d 64 (1972). Without an injury, there is simply no basis for awarding punitive damages, regardless of how much interest society might have in preventing a reoccurrence of egregious conduct. 1 The fact that both compensatory and punitive damages were requested on the basis of a single alleged tort does not convert a tort action into separate causes of actions. There is still only one personal injury claim on account of which damages might be awarded. Shell Oil Co. v. Parker, 291 A.2d at 67-69 ; Kneas v. Hecht Co., 257 Md. 121 , 262 A.2d 518 (1970). The punitive damages in this case therefore, being predicated upon the existence of a personal injury, were “received * * * on account of personal injuries.” The very purpose of section 104(a)(2) is to exclude from income amounts which would otherwise have been taxed. The fact that punitive damages represent an accession to wealth and therefore would normally be included in gross income is no reason to preclude the application of section 104(a)(2). Indeed, even certain compensatory damages would seem to be includable in taxable income as an accession to wealth were it not for the existence of section 104(a)(2). For example, compensatory damages for personal injury are frequently measured by the injured party’s lost future earnings. Such future earnings would have been accessions to wealth and would clearly have been taxable. Even respondent agrees that compensatory damages, that are determined by reference to lost future income, are excludable under section 104(a)(2). Rev. Rul. 85-97, 1985- 2 C.B. 50 . By adopting the position expressed in the majority opinion, we avoid producing totally different results under section 104(a)(2), depending upon the characterization of tort damages under various State laws. For example, in Burford v. United States, 642 F. Supp. 635 (N.D. Ala. 1986), the cause of action which produced punitive damages at the state court level was an action for wrongful death. (A wrongful death action would seem to involve the ultimate personal injury.) Nevertheless, as the court in Burford noted, under Alabama law a wrongful death action could only result in an award of punitive damages as opposed to compensatory damages. Adoption of respondent’s position would preclude application of section 104(a)(2) benefits to claimants in Alabama (or any States with a similar statute) while allowing exclusion of damages on account of wrongful death actions in other States even though the universal predicate for any wrongful death action is a personal injury to the decedent. See Rev. Rul. 84-108, 1984- 2 C.B. 32 . Adoption of respondent’s position would likely produce substantial litigation over the proper characterization of damages resulting from settlements of personal injury actions. Undoubtedly, most personal injury actions are settled prior to trial. It would be reasonable to assume that both plaintiff and defendant would normally seek to avoid characterizing any part of the settlement as punitive damages. The plaintiff’s reasons are obvious given the potential tax implications illustrated by this case. Likewise, it is hard to imagine scenarios where a defendant would affirmatively wish to characterize any portion of damages as punitive since such a characterization indicates that the defendant’s actions were egregious. In the event that the settling parties fail to distinguish between compensatory and punitive damages in their settlement agreement or respondent disputes the parties’ characterization of dam- ages as compensatory, respondent’s position would require a factual determination of which portion of the damages is excludable under section 104(a)(2). That factual determination would probably require presentation of the operative facts regarding the personal injury — the very same type of litigation the parties hoped to avoid by their settlement. I do not think that Congress intended to require such difficult factual determinations when it adopted the very broad language of section 104(a)(2), excluding from income “the amount of any damages received * * * on account of personal injuries * * * .” Sec. 104(a)(2). (Emphasis added.) Chabot, Swift, Jacobs, Gerber, Wright, Parr, Williams, and WELLS, JJ., agree with this concurring opinion. The fact that Maryland courts “might,” in some instances, presume the existence of an injury upon proof of defamation does not mean that punitive damages can be awarded in the absence of personal injury. See Sindorf v. Jacron Sales Co., 27 Md. App. 53 , 341 A.2d 856, 864 (1975). But cf. Shell Oil Co. v. Parker, 265 Md. 631 , 291 A.2d 64 (1972). --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4486338. Public record. Not legal advice.