Tax Court Finds Against Couple Who Neglected Tax on 'Emotional Distress' Settlement

WASHINGTON, D.C. - The U.S. Tax Court has found against a couple who failed to declare the proceeds of a settlement for workplace emotional distress because the written agreement makes no reference to any non-taxable, underlying physical injury. Gutierrez, et ux. v. Commissioner of Internal Revenue, No. 21671-08 (U.S. Tax Ct.).

The court's Nov. 7 opinion resulted in an additional tax and penalty for Miguel A. and Antonia Gutierrez based on Mrs. Gutierrez's 2005 settlement of a variety of occupational claims against the owners of a vineyard.

Antonia Gutierrez was one of four female workers who sued R.H. Phillips Inc. …