Stuart A. Bronstein wrote:
- quote -

Agree -- if you can tie the settlement back to the original
event it should retain the character of that event. This
seems to me to be similar to a legal settlement against a
financial manager, for example, for breach of fiduciary duty
to a client resulting in a capital loss. The recovery would
be a capital gain to offset against the loss carryover,
rather than ordinary income.

The part of the settlement that goes to attorney's fees is
ordinary income to be included on line 21 of form 1040,
partially offset by a miscellaneous deduction on schedule A
subject to 2% AGI floor.

The Murphy case, referred to in another reply, had to do
with non-physical injury rather than physical injury. That
is a different matter, AFAIK, and is still being litigated.

-Mark Bole

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"Nan, EA in LA" <naneklund[at]aol.com> wrote:

- quote -

Does the malpractice verdict allocate damages recovered
between the different types of damages that were being sued
for?

I think your instinct is correct - the type of damages will
relate back to the original case. What was recovered in the
malpractice case should have the same effect as if it had
been recovered in the original case.

Stu

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"Nan, EA in LA" <naneklund[at]aol.com> wrote:

- quote -

I've been dealing with a whistle blower case
But I think the issues are similar
I found a case last yr called Murphy, where the taxpayer
did not have to include the damages in income
But that case was vacated (Jan?) & will be re-done
I think the implications can be huge

So stay tuned

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] > > -----> real address on hobokeni or hobokenx <-----

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I know compensation for injury is not taxable and punative
damages are. However, a lawyer mishandled a case for
personal injury and the victim won a malpractice suit
against him. I keep thinking some, if not all, is a
substitute for what he should have received for injury. I
can't find malpractice in the list of taxable vs non-taxable
settlements.

Nan, EA in LA

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