A taxpayer receives an award of $250,000 in damages in a lawsuit relating to physical injuries she sustained in a mountain climbing accident. The damages include $200,000 representing punitive damages and $50,000 representing compensatory damages. The effect on the taxpayers gross income is:

a. include $250,000 in her gross income

b. include $50,000 in her gross income and exclude $200,000 from her gross income

c. exclude $200,000 from her gross income and deduct $50,000 from AGI

d. include $200,000 in her gross income and exclude $50,000 from her gross income

e. exclude $250,000 from her gross income