Delay damages are taxable income under federal law even when they are awarded to a personal injury plaintiff because their function and purpose indicate that they are not paid “on account of personal injury,” a federal judge has ruled.

In her 21-page opinion in Francisco v. Internal Revenue Service, U.S. District Judge Anita B. Brody rejected the argument that delay damages in Pennsylvania are any different from the pre-judgment interest awarded in other states, which three federal appellate courts have found to be taxable.

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