Legal Question in Tax Law in California

Re: Tax liability on settlement income

Yes, it is tax free! (At least something in life is). You can see the relevant provision of the Internal Revenue Code by oing to this link:

http://www4.law.cornell.edu/uscode/26/104.html. The relevant provision is section 104(a)(2).

I have been a tax lawyer for 24 years. I was 4 years with IRS Chief Counsel and hold the advanced degree of Master of Laws in Taxation (LLM) from Georgetown University. This help is free, but on bigger matters I do charge, but my fees are reasonable. I would appreciate your passing my name around.

Regards,

Wayne Wisong

Re: Tax liability on settlement income

It PROBABLY is not, but more detail is needed as to exact issues. A more interesting question is if you have to pay taxes on the attorney fees (assuming you paid a contingency fee).

Joel Selik

Attorney at Law,

Masters of Laws-Taxation (Ll.M.)

www.SelikLaw.com

www.TaxWorkOut.com

Re: Tax liability on settlement income

If the entire amount of the award is for a physical injury this is true. How the settlement agreement or judgment is written is critical here.

Re: Tax liability on settlement income

My answer assumed that all you recovered was comp for bodily injury. If part of it was for lost wages or lost business opportunities, that part could be taxable.