by John Darer CLU ChFC CSSC
On December 22, 2006, the Court of Appeals for the District of Columbia vacated its decision in Murphy vs. IRS, 460 F. 3rd 79 (D.C. Cir. 2006) and granted a new hearing before the judicial panel to include a new briefing schedule and oral argument. (Cited as: Marrita Murphy et al. v. IRS et al.; No. 05-5139) The hearing is scheduled for Monday, April 23, 2007.
The D.C. Circuit panel's original decision held that a compensatory award for emotional and professional reputation damages is excluded from gross income and that section 104(a)(2) is unconstitutional in allowing taxation on compensation unrelated to lost wages or earnings. Some had hoped the feeling would spread to other Circuits to benefit those with such elements of damages
However, the controversy surrounding the original decision of the DC Circuit led to the popular belief that the decision would be reversed. Some feel it is now surprising that the same panel that entered the decision vacated its own decision and granted a new hearing with a completely new briefing.
If the D.C. Court of Appeals were to rule against the IRS in Murphy, the case is likely to head to the Supreme Court. Therefore, the court may have wanted to further support its conclusions and, upon further reflection of the swirling commentary, felt that they may have gotten it wrong and want to reconsider.
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