Erik M. Jensen (Case Western) has posted The Receipt of Cash for Losses of Personal Rights, 103 Tax Notes 103 (Jan. 4, 2010), on SSRN.  Here is the abstract:

The D.C. Circuit’s first decision in Marrita Murphy v. IRS, concluding that a recovery for emotional distress was not taxable, received wide criticism. This viewpoint demonstrates that, contrary to conventional wisdom, the IRS before Murphy had a well-developed view that the receipt of cash for loss of a personal right was not a taxable event, regardless of whether any basis recovery or statutory exclusion was involved.

Update: Robert W. Wood (Wood & Porter, San Francisco), Wood Praises Article on Taxability of Personal Rights Compensation, 126 Tax Notes 677 (Feb. 1, 2010).