Just before the holiday break, a federal appeals court said it will reconsider a case involving the taxability of damages received for emotional distress.

The U.S. Court of Appeals for the District of Columbia Circuit vacated its late-August decision, which ruled that a woman did not owe taxes on a $70,000 settlement she received from a former employer for "emotional distress" and "loss of reputation." The court had found that Section 104 of the U.S. tax code -- which declares only compensation for physical injuries is tax exempt -- was unconstitutional and that the settlement shouldn’t be defined as income.

According to the court’s schedules, briefs for both sides will continued to be exchanged through early March.

The Supreme Court received its first petition for a rehearing based on the case, Murphy vs. the United States, in early November.

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