Mavis is injured in an automobile accident and sues the driver of the truck that struck her car. The court finds the driver liable and awards Mavis $10,000 to pay her medical expenses, $20,000 for her pain and suffering, and $5,000 for loss of income while she was unable to work. The court also finds the truck driver negligent and awards Mavis $50,000 in punitive damages. Which of the following statements concerning the receipt of these payments is/are correct?
I.Mavis is not taxed on any of the payments because they relate to a personal physical injury.II.Mavis must include the loss of income payment in her gross income.III.The punitive damage payment is taxable.?
A. Only statement I is correct.
B. Only statement III is correct.
C. Statements II and III are correct.
D. Only statement II is correct.
Answer: B
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