Code $ 104 - Compensation for injuries or sickness a) In general Except in the case of amounts attributable to and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include (1) amounts received under workmen's compensation acts as compensation for personal injuries or sickness; (2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness: (3) amounts received through accident or health insurance (or through an arrangement having the effect of accident or health insurance) for personal injuries or sickness (other than amounts received by an employee, to the extent such amounts (A) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (B) are paid by the employer); (B) on September 24, 1975, he was a member of any organization (or reserve component thereof) referred to in subsection (a)(4) or under a binding written commitment to become such a member, (C) he receives an amount described in subsection (a)(4) by reason of a combat-related injury, or (D) on application therefor, he would be entitled to receive disability compensation from the Veterans Administration... Sally is injured on the job by breaking her leg. She receives workman's compensation payments. Choose the correct answer: a) Sally should include the workman's compensation payments in her income. b) Sally can exclude the workman's compensation payments from her income. Kathy has won a lawsuit against her employer for discrimination. She is awarded $100,000 in punitive damages. Choose the correct answer: a) Kathy should include the punitive damages in her income. b) Kathy can exclude the punitive damages from her income