(a) IN GENERAL – Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include –(1) amounts received under workmen’s compensation acts as compensation for personal injuries or sickness(2) amounts of any damages (other than punitive damages) received (whether by suitor agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness;(3) amounts received through accident or health insurance(or through an arrangement having the effect of accident or health insurance) for personal injuries or sickness (other than amounts received by an employee, to the extent such amounts(A) are attributable to contribution by the employer which were not included in the gross income of the employee, or (B) are paid by the employer); (4) amounts received as a pension,annuity, or similar allowance for personal injuries or sickness resulting from active service in the armed forces of any country or in the Coast and Geodetic Survey or the Public Health Services, or as a disability annuity payable under the provisions of section 808 of the Foreign Service Act of 1980 ; and (5) amounts received by an individual as disability income attributable to injuries incurred as a direct result of a violent attack which the Secretary of State determines to be a terrorist attack and which occurred while such individual as an employee of the United States, engaged in the performance of his offical duties outside the United States. For purposes of paragraph (3), in the case of an individual who is, or has been, an employee within the meaning of section 401(e)(1) (relating to self-em-ployed individuals), contributions made on behalf of such individuals while he was such an employee to a trust described in section 401(a) which is exempt from tax under section 501(a), or under a plan described in section 403(a), shall, to the extent allowed as deductions under section 404, be treated as contribution by the employer which were not included in the gross income of the employee. For purposes of paragraph (2), emotional distress shall not be treated as a physical injury or physical sickness. e preceding sentence shall not apply to an amount of damages not in excess of the amount paid for medical care (described in subparagraph (A) or (B) of section213(d)(1) attributable to emotional distress(Effective August 20, 1997).
