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So, after reading a news article, I was wondering...

So, I was reading this news article about Jaycee Dugard (she was kidnapped at 11 and held for 18 yrs, being raped repeatedly and giving birth twice while prisoner). Her kidnapper was already in the criminal system, and, due to one screw up after another, and a lot of general incompetence / neglect on the part of the people who were supposed to be keeping tabs on him, her abductor was able to get away with it for this long.

Because of all of this, the State of CA has agreed to settle with her family out of court for 20 million (like it said, it will take over 4oo thou to educate the 3 of them, over 7 mil for lifetime therapy for her and her 2 teen dd's, etc...)

So, not that it makes the case any less heinous, but I couldn't help but wonder, does she have to pay State taxes on that settlement now? I'm assuming Fed taxes, but the State is the one being penalized here... Doesn't seem fair they should get some back.


Asked by sailorwifenmom at 9:33 AM on Jul. 8, 2010 in Politics & Current Events

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Answers (8)
  • This IS a good question, but unfortunately it's a very gray area--of course, since we're talking about the IRS!! Basically, large lawsuit settlements fall under personal injury or breech of contract, and the Dugard case is a tremendously extenuating circumstance--and I don't think current tax codes can even be applied in this case. Of course I think she should get every penny, since she was abused, held captive, and forced to bear the children of her kidnapper. She should also be able to sell her story to anyone and everyone, and capitalize on it wherever possible.

    This was the simplest document I could find on tax code law... (the IRS publications are much too confusing!)


    Answer by LoriKeet at 9:52 AM on Jul. 8, 2010

  • That is a good question! I would assume that she would because settlements are treated as income ... but if the state's the one paying up? Interesting.

    Answer by Scuba at 9:38 AM on Jul. 8, 2010

  • Good question. Bump!

    Answer by Energ8zr at 9:37 AM on Jul. 8, 2010

  • I don't think so.

    In PA a court awarded some boys who were abused at the Hershey School about 250,000 each and I dont think they had to pay taxes on it...could be mistaken though.

    One of the men was on disability though and it made him lose that, so instead of putting it away he had to start living off it


    Answer by sweet-a-kins at 9:39 AM on Jul. 8, 2010

  • I'm sure she will. I really do not believe there is an "exception" just because the "person" you settle with is the state. Is she living in CA? I can't find a article now to back it up, but I thought they (Jaycee, her children, and Mother) were NOT in CA at this time. If that's true then she would have to pay the state taxes on the settlement for the state she's living in.

    Answer by SAHMinIL2 at 9:50 AM on Jul. 8, 2010

  • Thanks! I was thinking the same thing - it doesn't seem right that they should be able to get some of that back in tax money. Part of the purpose of the settlement is to penalize them for their negligence. Otherwise, they would just be saying send us the bills. So, if a private company were to be held negligent, they wouldn't be able to give an amount, then insist on a percentage back. (Especially given how high CA's taxes are...)

    Also, I think it's messed up that the settlement should affect disability. If he is unable to work due to injury, then he's unable to work. Getting a settlement for something unrelated shouldn't have anything to do with it. Disability is not government assistance that is need based, after all! (Not slamming on people getting PA, just saying that one is need / income based, and one should be ability based...)

    Comment by sailorwifenmom (original poster) at 9:52 AM on Jul. 8, 2010

  • I don't know, but I hope she does not. The state fell on its face in the most appalling way - that guy had POs coming to his place every month, and not one of them took a stroll through the backyard.

    Answer by LiliM at 1:54 AM on Jul. 9, 2010

  • Thanks everyone - I agree that she should not, but, after looking at that link, it looks like she might have to pay taxes for some of it.

    I agree though, given the appalling way that the govt fell on their faces with this monster, resulting in this nightmare for her - I was going to say girl, but she's a woman still dealing with it, but I can't say woman, because she was a child when she was taken, not to mention the hell her family lived through wondering what happened, and those poor girls she gave birth to.... Ugh - it just want to vomit when I think of this whole horrific situation!

    In my opinion, she should have gotten at least double that amount!!!!!

    Comment by sailorwifenmom (original poster) at 9:12 AM on Jul. 10, 2010