Whether or not a jury should be instructed, in a personal injury case, that its verdict is exempt from federal income taxation, has been much discussed recently. A most practical element in this problem is the difference between "gross pay" and "take-home pay" in computing the present value of future earnings, when estimating damages. The real question presented by the topic concerns impairment, or deprivation, of future earning capacity. Some of the early English cases which I shall mention considered earnings lost between the time of injury and the time of trial, in addition to the impairment of future earning capacity. Unfortunately, such decisions, in some instances, fail to make clear the apparent (more than real) distinction between the two situations.
John J. Kennett, Tax Aspects of Jury Valuation of Future Earnings, 6 Clev.-Marshall L. Rev. 282 (1957)