by Thomas D. Begley, Jr., Esquire, CELA<\/p>\n
Generally, \u201call income from whatever source derived\u201d is considered gross income by the Internal Revenue Service (\u201cIRS\u201d).[1]<\/a> However, income received as a result of a personal physical injury or a physical sickness is not considered income by the IRS.[2]<\/a> However, punitive damages are considered taxable income.[3]<\/a> The determining factor with respect to the treatment of litigation recoveries is the \u201corigin of the claim\u201d test. \u201cThe origin and character of the claim upon which an expense was incurred rather than the potential consequence upon the fortunes of the taxpayer\u201d is the controlling test.[4]<\/a><\/p>\n The physical injury generally involves a touching<\/em> that produces physical harm. The physical harm must be observable bodily harm<\/em>.[5]<\/a> Therefore, it would appear that most settlements involving sexual abuse victims are subject to taxation, because there is seldom observable bodily harm<\/em>. Emotional distress is not treated as a physical injury or physical sickness.[6]<\/a> However, (more…)<\/span><\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" by Thomas D. Begley, Jr., Esquire, CELA Generally, \u201call income from whatever source derived\u201d is considered gross income by the Internal Revenue Service (\u201cIRS\u201d).[1] However, income received as a result of a personal physical injury or a physical sickness is…<\/span><\/p>\n