Chapter 2: The story of Murphy II
Fact: The case is Marrita Murphy and Daniel J. Leveille, Appellants v. Internal Revenues
Service and United States of America, Appellees (2007-2 U.S.T.C 50,531). This case
continue to analyze gross income: compensation for injuries or sickness: constitutionality.
The tax on an award of damages fro an nonphysical personal injury operates with the same
force and effect throughout the United States and, therefore satisfied the requirement of
uniformity.
Issue: Whether Murphy’s compensation was not excludable from gross income? Whether a
tax upon such damages is within the Congress’s power to tax? Whether the tax laid upon
Murphy’s award violates either of these two constraints?
Rules: Gross income as defined by Code Sec.61 includes compensatory damages for
nonphysical injuries. Murphy’s award is within the reach of the congressional power to tax
under Article I, Section 8 of the constitution. Section 104(a)(2) does not permit Murphy to
exclude her award from gross income. And Article I, Section 8 show tax is uniform when it
operates with the same force and effect in every place where the subject of it is found
Analysis: IRS, unlike the United States, may not be sued in this case. Murphy’s damages
were not “awarded by reason of, or because of…[physical] personal injuries,” Therefore,
the Sec104 (a)(2) does not permit Murphy to exclude her award from gross income. For
the 1996 amendment of Sec104 (a) to “make sense.” Gross income in Sec61 (a) must