McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 73

Jim was injured in an accident and his surgeon botched the medical procedure.Jim recovered $5,000 from the doctors for pain and suffering and $2,000 for emotional distress.Determine the taxability of these payments and briefly explain to Jim the apparent rationale for including or excluding these payments from gross income.