Case Ernest And Mary Hortons

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Ernest and Mary Horton’s were injured when their house exploded and caught fire as a result of a gas leak. In a suit filed against the gas company, they were awarded both compensatory and punitive damages. According to the IRC code §104(a)(2), compensatory damages are excluded from gross income. However, the case Horton v. Commissioner examines whether the punitive damages should also be excluded from the taxpayers’ gross income. The Horton’s position was that it is excluded, and the IRS’ stance was it needs be included as part of their taxable

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