"William Brenner" <wbrenner[at]nospamplease.net> wrote in message
news:G8%Rj.61163$rC6.47870[at]bignews4.bellsouth.net...
- quote -

If it is indeed income, then it is taxable at the federal level. However,
not all payments constitute income to the recipient.

Compensation for losses are generally "matters of equity" in the federal
courts (as opposed to "matters of law"). As such, their goal is usually to
restore or make whole, and in that sense, the compensation necessary to
perform that function is not income at all (to the extent that the loss was
never deductible/deducted and that it does not otherwise replace income that
is of a taxable nature). Recently (2007), the 2nd Circuit briefly took that
position before reversing themselves and I believe that their first
impression may have been the correct one. I also believe that IRC 104 is a
completely unnecessary statute.

Therefore, from the legal aspect, except for an amount in lieu of wages or
earning power lost while imprisoned, the [remaining] amount of the payment
should not even meet the definition of income. However, the IRS will
probably say that it is simply because one receives it and it is not
statutorily exempt.

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In article <9fed6317-0256-4e46-9fb5-ba2112e9d5f8[at]l28g2000prd.googlegroups.com> ,
removeps-groups[at]yahoo.com <removeps-groups[at]yahoo.com> wrote:
- quote -

The state punishing itself? Seems unlikely.

I'd classify it as "compensatory for loss of freedom". I don't know
to what extent that might include "loss of wages that would otherwise
have been earned".

- quote -

Only if they had to pay for their own medical treatment, and to the
extent of the cost of that treatment.

Seth

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AES <siegman[at]stanford.edu> wrote:
- quote -

In theory I agree with you. But in practice it won't work that way.
First of all in order to get punitive damages he'd have to sue and get
a court judgment saying punitive damages. And unless it can be shown
that the prosecutor knew he was actually innocent or withheld
exculpatory evidence from the defense, he's not likely to win even
compensatory damages in a suit like that.

Stu

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"removeps-groups[at]yahoo.com" wrote:
- quote -

I'd say it's all taxable as compensation, not as punitive damages.
Sort of as compensation for the money he would have earned if he
hadn't been in prison.

I haven't researched this issue, however, and it is possible that
under some circumstances some of an award might be excludible as for
personal injuries, though I doubt it.

- quote -

I suppose in this situation it really doesn't make any difference.
But in some cases it may make a difference to the payor because
punitive damages may not be as deductible as compensatory damages.

And for the recipient the deductibility of attorneys fees with
respect to punitive damages may not be as great as for compensatory
damages (section 212 versus section 162). I doubt that would apply
in this case, however.

- quote -

The payment would have to be to compensate specifically for that
physical injury. Since it's a generalized law based on days
incarcerated rather than physical damages caused, no part of this
kind of a payment is likely to be tax free on that basis.

Stu

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In article
<9fed6317-0256-4e46-9fb5-ba2112e9d5f8[at]l28g2000prd.googlegroups.com> ,
"removeps-groups[at]yahoo.com" <removeps-groups[at]yahoo.com> wrote:

- quote -

Huh? No legal expertise on this issue, but certainly sounds to me like
(deserved!) compensation for real mental/emotional/personal damages that
would certainly be caused/experienced from being falsely imprisoned.

(I'd like 'em to be seriously punitive for the state also, of course.)

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On Apr 30, 10:49*am, Stuart Bronstein <spamt...[at]lexregia.com> wrote:

- quote -

So if the 50k a year is compensatory damages, you think it is all
federally tax free? Or as you saying that the 50k is for not specific
personal injury, and is therefore is fully federal taxable? My
original response said that the 50k is also fully federal taxable, but
because it is punitive damages.

The distinction between "punish itself for wrongdoing" and "trying to
give the convict something" seems rather subjective to me. It is
punitive damages or compensation, depending on your point of view. In
the welfare state, perhaps "trying to give the convict something" is
the way to see it, as governments are always-giving entities.

Also, if there was was specific physical injury, as in the case of
torture, then I think part of compensation would be tax free.


- quote -

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"removeps-groups[at]yahoo.com" <removeps-groups[at]yahoo.com> wrote:

- quote -

I'd think the damages are compensatory, not punitive. The state is not
trying to punish itself for wrongdoing, it's trying to give the convict
something to compensate for his wrongful time in prison.

In addition, it is not for personal injuries - generally the courts
require the payment be for actual physical damage rather than
psychological injury or generalized bad treatment.

Stu

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On Apr 30, 10:14*am, William Brenner <wbren...[at]nospamplease.netwrote:
- quote -

California: Not Taxable http://tinyurl.com/4t5le7

CT: Not Taxable
While the amount proposed is substantial, you should also be aware
that it is the position of the IRS that any compensation that Mr.
Tillman or others like him receives for anything other than “physical
injury” is income for federal tax purposes and would be taxable at a
rate of 35%. While Mr. Tillman would contest this with the IRS, there
is a strong possibility that he would have to pay federal income taxes
on the award of up to $1.75 million. The bill does provide that the
award would be exempt from state income tax purposes.

Milt Baker CPA
Michigan

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William Brenner wrote:
- quote -

wrongful imprisonment acts that exempt such payments from state
income taxes. Some states appear to pass legislation that is
individual specific.

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On Apr 30, 7:14 am, William Brenner <wbren...[at]nospamplease.net> wrote:

- quote -

Publication 525 (2007), Taxable and Nontaxable Income

http://www.irs.gov/publications/p525/ar02.html#d0e7846

<QuoteCourt awards and damages. To determine if settlement amounts you
receive by compromise or judgment must be included in your income, you
must consider the item that the settlement replaces. The character of
the income as ordinary income or capital gain depends on the nature of
the underlying claim. Include the following as ordinary income.

1.

Interest on any award.
2.

Compensation for lost wages or lost profits in most cases.
3.

Punitive damages, in most cases. It does not matter if they
relate to a physical injury or physical sickness.
4.

Amounts received in settlement of pension rights (if you did not
contribute to the plan).
5.

Damages for:
1.

Patent or copyright infringement,
2.

Breach of contract, or
3.

Interference with business operations.
6.

Back pay and damages for emotional distress received to satisfy
a claim under Title VII of the Civil Rights Act of 1964.
7.

Attorney fees and costs (including contingent fees) where the
underlying recovery is included in gross income.

Do not include in your income compensatory damages for personal
physical injury or physical sickness (whether received in a lump sum
or installments).
</Quote
The relevant lines are:

<RelevantPunitive damages, in most cases. It does not matter if they relate
to a physical injury or physical sickness.
Do not include in your income compensatory damages for personal
physical injury or physical sickness (whether received in a lump sum
or installments).
</Relevant
So is the 50k a year punitive damages or compensatory? Sounds like
punitive to me, though if the prisoners were physically beat up or
physically tortured, then a part of the 50k would be compensatory
damages and consequently tax free (if they were beat up once in the
year and the recovery time was 30 days, then I would imagine that
1/12th of the 50k would be tax free).

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"William Brenner" <wbrenner[at]nospamplease.net> wrote
- quote -





I see no reason that the feds would exempt this income.

Technically it's a moot point in Florida. But what if it's paid out in
installments, and you receive an installment while residing in another
state.







- quote -



Aww....inquiring minds want to know.......



--
Paul A. Thomas, CPA
Athens, Georgia

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The Florida legislature has passed with but one negative vote
-- not yet signed by the Governor -- a bill that would pay wrongfully
imprisoned persons $50,000 per year of imprisonment, with a maximum of
one million dollars.

http://www.miamiherald.com/news/flor...ry/514849.html

The question is: Is this federal taxable income?

(Note: I have no personal interest in this matter other than curiosity.)

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