Leigh sued an overzealous bill collector and received the following settlement:
Damage to her automobile that the collector attempted to repossess ..... $ 3,300
Physical damage to her arm caused by the collector ........... 15,000
Loss of income while her arm was healing ................ 6,000
Punitive damages ......................... 80,000
a. What effect does the settlement have on Leigh’s gross income?
b. Assume that Leigh also collected $25,000 of damages for slander to her personal reputation caused by the bill collector misrepresenting the facts to Leigh’s employer and other creditors. Is this $25,000 included in Leigh’s gross income? Explain.