This note examines § 104(a)(2) and the D.C. Circuit decision in Murphy v. I.R.S. focusing on the need for further guidance on taxation of personal damages. Part II inspects the background of taxation generally and § 104(a)(2) specifically. Additionally, Part II looks at the cases that shaped taxation of personal injury awards and Congress's interpretation of this taxation. Part III discusses the background and judicial response to Murphy's complaint, including the Secretary of Labor's findings, Administrative Law Judge's recommendations, the District Court decision, and the D.C. Circuit arguments and decision. Part IV assesses the reasoning of the D.C. Circuit's decision, advocating that it is the correct path for the taxation of personal injury awards. Furthermore, Part IV looks to the future of § 104(a)(2) and provides recommendations to plaintiffs and their attorneys. The last section of Part IV returns to Emily's hypothetical and discusses what taxation options exist for the child. Finally, Part V calls for more analysis and guidance in applying § 104(a)(2) and further for a decision supporting the original Murphy ruling.

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