Disability Reimbursement

[Bird Legs]

Client had to quit work 2 years ago due to disability. In 2007, after many hearings, client finally won out over the insurance company. The insurance co. is required to pay her $25,000. for back years and approximately $1,000. for medical expenses that client had to pay for in 2006.
Question, will the medical expense reimbursement of $1,000. be taxable income for 2007?
How about the $25,000. that will be received in 2007?

[solomon]

If she

did not get a tax benefit from the medical she paid, then the reimbursement should not be taxable. Regarding the 25k from the insurance company, if she was paying the premiums, then not taxable - otherwise it would be taxable if she did not pay premiums - going on memory. If taxable, under Reg. 1.212-1 she could deduct any expenses incurred to collect the money - Misc Sch A.