What is income?

Colonel_Buck · Post by **Colonel_Buck** » Wed Sep 26, 2007 12:58 pm

My wife and I received a check as settlement of a class action lawsuit we were involved in and I was wondering if it is considered income? Gross, taxable or otherwise?

Nikki · Post by **Nikki** » Wed Sep 26, 2007 2:32 pm

The simplest answer is "assume it is income."

Next, review the tax code to see if it is specifically addressed.

Better yet, contact a knowledgable tax professional with the specifics of the settlement and have him/her make the determination.

Truthstalker · Post by **Truthstalker** » Wed Sep 26, 2007 3:44 pm

If I rob a bank and get away clean, do I have income?

BBFlatt · Post by **BBFlatt** » Wed Sep 26, 2007 4:21 pm

Truthstalker wrote:If I rob a bank and get away clean, do I have income?

For purposes of IRC seciton 61, if you are a U.S. Citizen or the bank is located in the U.S., you have gross income.

If you later get caught, and pay back the money (or as much as you have left after wine, women, cigars and Glocks) you have an itemized deduction.

Room and board at the state or federal facility of the court's choice is a non-taxable benefit.

Dr. Caligari · Post by **Dr. Caligari** » Wed Sep 26, 2007 4:42 pm

My wife and I received a check as settlement of a class action lawsuit we were involved in and I was wondering if it is considered income? Gross, taxable or otherwise?

It depends on what the case was about.

If it was a class action against your employer for not paying overtime pay to its employees, the amount received in the lawsuit is a replacement for what would have been taxable wages, so the lawsuit payment is taxable. If the lawsuit was for losses when you sold stock, the amount received is probably capital gains. If it is for personal injuries, it is not taxable.

You should consult a tax professional, because sometimes these issues raise close questions.