Erich Schleier (plaintiff) was over 60 years old and therefore was protected by the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. § 621-34. Under the ADEA, Schleier claimed that he was laid off from work because of his employer’s age discrimination. Schleier’s claim was settled, and he was awarded back pay and liquidated damages. The commissioner of internal revenue (commissioner) (defendant) issued a deficiency notice against Schleier for not including the liquidated damages in his gross income. Schleier filed a petition challenging the deficiency notice, contending that the liquidated damages were statutorily excluded from his gross income because they compensated him for damages received on account of personal injuries or sickness. The tax court ruled for Schleier, and the commissioner appealed. The court of appeals affirmed. The United States Supreme Court granted certiorari.