Business Law
Business Law News 2016, ISSUE 4
Content
- Ann Yvonne Walker Receives Business Law Section's Lifetime Achievement Award
- Bln Editorial Board: Message from the Editor
- Business Law News Editorial Team
- Executive Committee: Message from the Chair
- Executive Committee of the Business Law Section 2016-2017
- Standing Committee Officers of the Business Law Section 2016-2017
- Table of Contents
- Taxes, Constructive Receipt, Structured Legal Fees, and Escrows
- The Dangers of Misclassifying Construction Workers as Independent Contractors in California
- You're Out of Here: Expulsion of an Llc Member Under Rullca
- Are Insurance Bad Faith Recoveries Taxable?
Are Insurance Bad Faith Recoveries Taxable?
Robert W. Wood
Robert W. Wood is a tax lawyer with www.WoodLLP.com, and the author of numerous tax books, including Taxation of Damage Awards & Settlement Payments (www.TaxInstitute.com). This discussion is not intended as legal advice.
Are insurance bad faith litigation recoveries taxable? The annoying answer is: it depends. This is because, although damage awards and insurance proceeds are generally considered "gross income" for tax purposes, the Internal Revenue Code ("IRC") provides an exception for damages received "on account of personal physical injuries or physical sickness" and for amounts received "through accident or health insurance … for personal injuries or sickness."1 As discussed in this article, determining whether a particular bad faith recovery qualifies under one of these exceptions can be tricky.