Enter punitive damages as "Other Income" on line 21 of 1040 with exception to Special Wrongful Death Circumstances in which the punitive damages are not taxable. Emotional distress and discriminatory damages are awarded as Compensatory Damages and are either taxable or nontaxable determined by the specificity of the damage in which the award is given. I have never heard of the term "smart money" as anything other than an investment magazine. In any case, be sure to consult with a tax professional prior to filing.