Juanita Smallwood v. United States Government

MEMORANDUM

Plaintiff-appellant Juanita M. Smallwood appeals the district court’s grant of summary judgment in favor of the United States, wherein the district court found that Smallwood was not entitled to a refund for the taxes that she paid on settlement proceeds she received in 2004 in connection with a state court action against the California Department of Corrections (“CDC”) and two of its employees. We have jurisdiction pursuant to 28 U.S.C. § 1291 , and we review de novo the district court’s grant of summary judgment and its interpretation of the Internal Revenue Code. Reynoso v. United States, 692 F.3d 973, 977 (9th Cir.2012).

We agree with the district court’s determination that there is a genuine factual dispute as to what dollar amount, if any, of the settlement proceeds from the CDC was intended to compensate Smallwood for her physical injuries or physical sickness. Under 26 U.S.C. § 104 (a)(2), Smallwood would be entitled to exclude from her gross income for 2004 the portion of the settlement proceeds that was paid to her with the intent of compensating her for physical injuries or physical sickness. 26 U.S.C. § 104 (a)(2) (explaining “gross income does not include…