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Taxability of Judgments and Deductibility of Related Costs

After receiving a large settlement, a new client comes to you and says, "My barber, attorney, friend said: "I don't have to pay taxes on this money.

" Lights should go off in your head and danger signals should be flashing before your eyes. Unfortunately, it is the tax advisor's responsibility to say "Maybe," and then explain the basic tax laws related to the receipt of a judgment, settlement, or other lump sum related to a suit or potential suit. Generally, judgments are not taxable if the money received is for personal injury. In most all other cases, the judgment is taxable. Just as there are grey areas in taxability of judgment income, there is also controversy as to whether legal fees and related costs are deductible and if so, where. Let this former IRS auditor guide you through the maze of rules related to the taxability of judgments and deductibility of related expenses. Learning Objectives: •You will be able define when judgments are taxable and learn the exceptions. •You will be able to recognize if related costs are deductible. •You will be able to describe if damages paid are deductible? •You will be able to explain if legal fees deductible.

Runtime: 96 minutes
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Why Lorman?

Over 31 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

Agenda

General Rule - Judgments Are Taxable but Learn the Exceptions

  • Personal Injury Awards
  • Punitive Damages
  • Back Wages
  • Loss of Property

Are Damages Paid Deductible?

  • Yes
  • No

Are Legal Fees Deductible? If So, Where?

  • Business Related
  • Investment Related
  • Personal

Are Related Costs Deductible?

  • General Rule - If Judgment Income Reported, Related Costs Are Deductible, but Where?
  • General Rule - If Judgment Is Not Taxable Related Costs Are Not Deductible. But?

General Rule - Interests Is Always Taxable

  • Source of Interests
  • Tracing Rules
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Why Lorman?

Over 31 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

Credits

OnDemand Webinar

This program does NOT qualify, nor meet the National Standard for NASBA accreditation.

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Why Lorman?

Over 31 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

Faculty

Greta P. Hicks, CPA

Greta P. Hicks, CPA

Greta P Hicks Cpa

  • Former IRS Revenue agent and regional training coordinator
  • After a stint as tax manager for Ernst & Young, Greta started her own business and for 34 years her CPA practice has been limited to representing persons who have IRS problems
  • Wrote, "IRS Examination and Appeals Procedures" on www.CCH.com as well as, pilot tester of on-line continuing education courses for Thomson-Reuters
  • Wrote a number of continuing education courses on IRS practice and procedures and has articles regularly published in professional as well as trade magazines
  • Has traveled the U.S. and taught tax update seminars as well as various “Inside the IRS” topics
  • Currently active on the Texas Society of CPAs’ IRS Relations Committee and is former coordinator of Houston’s IRS/Practitioner Study Group
  • Serves on the Editorial Board of the Texas Society of CPAs and is tax editor of Today’s CPA
  • Can be contacted at [email protected], www.gretahicks.com or 713-681-6398
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Over 31 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

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Product ID: 391935
Published 2013
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