The opinion
KENNEDY, Circuit Judge,
dissenting.
The arguments for and against excluding punitive damages from taxable income in a personal injury case are fairly set forth in Judge Brown’s opinion and the opinions of the Ninth, Federal and Third Circuits in Hawkins v. United States, 30 F.3d 1077 (9th Cir.1994); Reese v. United States, 24 F.3d 228 (Fed. Cir.1994), aff'g 28 Fed.Cl. 702 (1993); and Commissioner v. Miller, 914 F.2d 586 (4th Cir.1990), rev’g 93 T.C. 330 (1989). I find the reasons for not excluding such damages from taxation more persuasive for essentially the same reasons Judge Goodwin did in reaching that conclusion for the Ninth Circuit in Hawkins . Accordingly, I dissent. I do not think that Kentucky’s explanation of why the concept of punitive damages should not be discarded makes punitive damages in Kentucky somehow different from other states. The primary purpose of punitive damages is to punish the defendant and thus deter such conduct. That there is a feeling of injury because of the egregious conduct, beyond the effects of the conduct, that is, beyond the personal injuries, does not mean that the physical injuries are any greater. In the case of injuries resulting in death, the result is death whether the conduct is merely negligent or willful. I believe the additional injury referred to is a societal injury. I note that approximately half of Mr. Horton’s and a third of Mrs. Horton’s compensatory damages were for the loss of their home and its contents. There is no indication that the punitive damage award was solely related to their physical injuries. There is a feeling of greater injury in having your home blown up because of egregious conduct than if it were due to mere negligence. The injury referred to by the Ken- *633 tacky Supreme Court is, I believe, this sense of outrage. Although it could be characterized as a personal injury, it is not the injury Congress intended to be excludable when it spoke of personal injury or illness. 1
. As the majority notes, the IRS made no argument that any portion of the punitive damages was attributable to property damage. The dissenting tax court judge agreed with the majority that the tax court should not raise the alternative argument for allocation of punitive damages sua sponte and the majority expressed no view on the point. I am not suggesting an allocation. Rather, I suggest there is no difference for the increased injuty which Kentucky uses as a justification for punitive damages whether the plaintiff suffers physical injury or property damage.