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.
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!) http://blog.oregonlive.com/taxes/2008/10/question_from_christopher_octo.html
Answer by LoriKeet at 9:52 AM on Jul. 8, 2010
Answer by Scuba at 9:38 AM on Jul. 8, 2010
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
Answer by SAHMinIL2 at 9:50 AM on Jul. 8, 2010
Answer by LiliM at 1:54 AM on Jul. 9, 2010