Who Said Tax Cases Were Boring?

Thanks to the Roth CPA.com for referring us to this interesting tax court case in which the IRS sought to tax a settlement received by a cameraman who was allegedly injured by a very well-known basketball player in what the court referred to as the “incident.” (T.C. Memo. 2003-329). The writer notes that the Bulls won in that game 112-102 and that the player received an 11-game suspension and a $25,000 fine from the NBA. The cameraman walked away with $200,000 and the IRS later claimed its fair share. Did the IRS win? Partially. The court held that the IRS could tax only $80,000 of the settlement and that the other $120,000 was paid on account of physical injuries and therefore excludable from income.