Linda was injured in an automobile accident caused by another driver. Her son, Matthew, was in the automobile but not physically injured. The other driver's insurance company was required by a court to pay Linda $75,000 to cover medical bills relating to her injuries, $30,000 to compensate her for emotional distress attributable to the injuries and $40,000 of punitive damages. Matthew was paid $15,000 to compensate him for emotional distress attributable to his witnessing his mother's injuries. What is the amount taxable to Linda? a. $30,000. b. $40,000. c. $105,000. d. $145,000.

Individual Income Taxes
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Author:Hoffman
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Chapter5: Gross Income: Exclusions
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Linda was injured in an automobile accident caused by another driver. Her son, Matthew, was in the automobile but not physically injured.
The other driver's insurance company was required by a court to pay Linda $75,000 to cover medical bills relating to her injuries, $30,000
to compensate her for emotional distress attributable to the injuries and $40,000 of punitive damages. Matthew was paid $15,000 to
compensate him for emotional distress attributable to his witnessing his mother's injuries. What is the amount taxable to Linda?
a. $30,000.
b. $40,000.
c. $105,000.
d. $145,000.
Transcribed Image Text:Linda was injured in an automobile accident caused by another driver. Her son, Matthew, was in the automobile but not physically injured. The other driver's insurance company was required by a court to pay Linda $75,000 to cover medical bills relating to her injuries, $30,000 to compensate her for emotional distress attributable to the injuries and $40,000 of punitive damages. Matthew was paid $15,000 to compensate him for emotional distress attributable to his witnessing his mother's injuries. What is the amount taxable to Linda? a. $30,000. b. $40,000. c. $105,000. d. $145,000.
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