17.75 DAMAGES: COMPENSATORY DAMAGES NOT TAXABLE refers to a type of damages awarded to an individual or business as compensation for a loss or injury. These damages are not taxable under the Internal Revenue Code. Compensatory damages are typically awarded in cases of breach of contract, negligence, or other civil wrongs. They are meant to restore the plaintiff to the same position they were in before the wrong was done. Types of compensatory damages include direct damages, consequential damages, and punitive damages. Direct damages are awarded to compensate for the actual losses incurred. Consequential damages are awarded to compensate for any foreseeable losses or damages caused by the defendant's breach. Punitive damages are intended to punish the defendant for their wrongful actions and are typically awarded in cases of intentional or reckless misconduct.