Don't Mess With Taxes

Back in August, a Washington, D.C., federal appeals court judge ruled in Murphy v. The United States that the federal government cannot tax money individuals receive as compensation for emotional distress and other intangible injuries.

Now, however, the full federal appeals panel has overturned the ruling. Yep, Murphy's Law does indeed apply to other, more official laws, too.

I'm not a trained legal scholar, but I am glad that this issue will get another look. No, I'm not arguing that Uncle Sam get a piece of every single dollar any of us makes. But this case seemed at best problematic, as I noted here.

Joe at Roth & Company CPA predicted this latest legal move all along. Following the August ruling he wrote, " … I am more convinced that yesterday's D.C. Circuit decision in Murphy is unlikely to stand." Read the rest of his argument here.

As you can imagine, this rehearing decision has the tax world, from attorneys and academics to bloggers and John Q. Taxpayer, buzzing once again. Comments can be found at:

• TaxProf    
• Roth & Company    
• Appellate Law & Practice   
• The Volokh Conspiracy   
• ACS Blog   
• Taxable Talk   
• A Stitch in Haste
• WSJ Law Blog
  

Tax scholars and legal eagles will have to wait until April 23, 2007, for the re-argument. Regardless of what happens after that, expect appeals.

And in this Murphy case, as everywhere, keep your eye open for the recurrence of Murphy's Law.