Transcription of Lawsuits, Awards, and Settlements Audit Techniques Guide
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lawsuits , awards , and Settlements Audit Techniques Guide NOTE: This document is not an official pronouncement of the law or the position of the Service and cannot be used, cited, or relied upon as such. This Guide is current through the publication date. Since changes may have occurred after the publication date that would affect the accuracy of this document, no guarantees are made concerning the technical accuracy after the publication date. Audit Guide Rev. 5/2011 1 Contents Chapter 1 Introduction and Issues .. 2 Introduction .. 2 Issues .. 3 Chapter 2 Taxability of Lawsuit Payments .. 4 Terminology/Definitions .. 4 Tax Treatment of awards and Settlements .
physical injury cases (e.g., discrimination, fraud, etc.). Damages for emotional distress in these cases are only excluded to the extent of paid medical expenses. Verify that the taxpayer reported taxable amounts at gross rather than reporting them net of legal and other fees paid. Determine if allowable legal fees were deducted properly.
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