Leigh sued an overzealous bill collector and received the following settlement:
|
Damage to her automobile that the collector attempted to repossess |
$ 3,300 |
|
Physical damage to her arm caused by the collector |
15,000 |
|
Loss of income while her arm was healing |
6,000 |
|
Punitive damages |
80,000 |
a. What effect does the settlement have on Leigh’s gross income?
b. Assume that Leigh also collected $25,000 of damages for slander to her personal reputation caused by the bill collector misrepresenting the facts to Leigh’s employer and other creditors. Is this $25,000 included in Leigh’s gross income? Explain.