PARADISE WILDFIRE received $ for Emotional Distress CA PREPARERS please HELP!!!

[nwtaxlady]

Taxpayer at the time in 2018 lost everything in the Paradise Wildfire in 2018. The Fire Victim Trust Fund was established after the Camp Fire in Butte County California & other wildfires. The utility company Pacific Gas & Electric was found liable for this fire as well as others. My client has since moved out of state and in 2023 has received a payment from this settlement and the Paperwork does state that $XXXX amount is for Emotional Distress. This fire was declared a disaster by the Governor AND by the President at the time.

My question is, is this taxable to Federal? And taxable to California even tho client has not lived in CA since 2020.
Is there any exception to these Wildfire victims since it was declared a disaster etc.??

TIA.

[Rapid Robert]

From Spidell forum:

"The 2018 Camp Fire (aka the Paradise Fire) wildfire settlements are excludable under state law (See R&TC Sec. 17138.5, 24309.3). For federal purposes these are taxable unless they may qualify for another exclusion (e.g. IRC Sec. 139)."

I have not dealt with it. It may depend on whether the money was used to rebuild or not.

"Taxpayer at the time in 2018 lost everything in the Paradise Wildfire in 2018."

No, they lost a subset of their tangible property (since you did not mention physical injury or death). And because of the settlement, their net loss was even smaller.

Not aimed at nwtaxlady, but why do people in general always tend to exaggerate like this? I don't get it.

[nwtaxlady]

Actually, I am not exaggerating. Their Settlement was ALot and then they do break it down for house and personal property, belongings etc. Then it goes further and breaks it down what amount of that large settlement was for Emotional Distress. The Man got more as it also listed extra Emotional Distress as he had driven thru the fire. The paperwork spells everything out as for what amount is for what. So each person has an amount for "Emotional Distress" I am very impressed with the paperwork they were given! So my question was dealing ONLY with the Emotional Distress which I find in my research it is taxable to Federal and that his is a bill, that has NOT passed yet that would make it not taxable.