Christie sued her former employer for a back injury she suffered on the job in 2017 . As a result of the injury, she was partially disabled. In 2018, she received $240,000 for her loss of future income, $160,000 in punitive damages because of the employer's flagrant disregard for the employee's safety, and $15,000 for medical expenses. The medical expenses were deducted on her 2017 return,
reducing her taxable income by $12,000 . Christie's 2018 gross income from the above is:
a. $415,000.
b. $412,000.
c. $255,000.
d. $175,000.
e. $172,000.
e
RATIONALE: Christie must include in gross income the $160,000 of punitive damages received and the $12,000 for the previously deducted medical expenses. The medical expense recovery is included in gross income under the tax benefit rule.
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