As most readers know, the Murphy decision in the D.C. Circuit last August held that the provision that provides for an exclusion for personal, physical injuries or sickness was unconstitutional because it permitted taxation of emotional damage awards. See prior postings here (updating), here (updating), and here (analysis of case)
The D.C. Circuit Court vacated its decision, and will hear arguments again in the case. The government has now filed its brief (available on Tax Prof), which makes some of the arguments that tax professors have been making, but perhaps not exactly in the way that some tax professors would have made them if they had been writing the brief. For good coverage of the issues (and access to the brief as well as prior documents in the case), see Paul Caron's TaxProf blog, here (general overview) and here (Germain critique of the government brief)
Aside: Please forgive my absence from the blogosphere--a severely sprained ankle has put me out of commission for several days.
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