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    omzig's Avatar
    omzig Posts: 119, Reputation: 19
    Junior Member
    		  
    #1

    Nov 11, 2006, 12:09 AM
    Lawsuit Damages
    I recently won a lawsuit for libel and was awarded both compensatory and punitive damages. I believe that the punitive damages are taxable and the compensatory are not. Is this correct?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #2

    Nov 11, 2006, 08:00 AM
    What you said is generally correct.

    As long as the compensatory damages are for injury and suffering, they are tax-free. If, however, they are supposed to replace lost income (such as lost wages), then the compensatory damages may be taxable as well.
    omzig's Avatar
    omzig Posts: 119, Reputation: 19
    Junior Member
    		  
    #3

    Nov 11, 2006, 08:52 AM
    Thanks AtlantaTaxExpert!

    How would you define "injury" as it applies here. Is it only physical injury or would it include damage to my professional reputation?
    omzig's Avatar
    omzig Posts: 119, Reputation: 19
    Junior Member
    		  
    #4

    Nov 11, 2006, 11:55 AM
    Never mind...

    After looking over some papers that my attorney gave me, I see where he spelled this out for me. Some of the compensatory award is taxable since it was for loss of income from a specific business deal that was lost as a direct result of the libel. The damages for harm to my professional reputation are not taxable.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #5

    Nov 12, 2006, 03:34 PM
    Great! Glad to help!
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