Taxpayer had damages from Hurricane Ike in 2008. Of course TWIA did not pay the insurance so he filed a lawsuit. This year 2010 they settled out of court for $62,000. The mortgage company received $12,000 and released the money to the taxpayer as he made the repairs. The lawyer received $25,000 and the t/p received $37,000. The lawyer told him he would not receive a 1099 because nothing was taxable. Everything I can find says the $37,000 is taxable. We have no paperwork to specify what anything is but there are no medical claims of any kind related to this claim. thanks.bc
-
-
It sounds like the TP had a casualty loss. There is not enough information here to give you a specific answer. Did he claim a casualty loss on his tax return? Did he receive more from the insurance company than his basis in the property? Was he in a federally declared disaster area? If he had a gain from the insurance reimbursement (amt paid exceeded the cost of the replacement property), then that gain is taxable. -
lawsuit settlement
Yes, he did have a casualty loss in a federally declared disaster area which we have already calculated on a prior return. This was just settled in 2010.Comment
-
See TTB 4-20. If he deducted a casualty loss in a prior year, and then recovered monies from the insurance company, you do not recompute the loss for the prior year. The reimbursement amt is included in income in the year received. If it resulted in a gain, see TTB 4-22.Comment
Comment