[WSBAPT] P&S part of WA taxable estate?

Fri Aug 28 23:22:08 PDT 2020

  Law Office of
F.ANDREKITA SILVA
________________________________________________________________________

.                                                        
                               August 28, 2020          

I would also like to know the answer to this.  About four months ago,  
I had asked about how to apportion damages where there is a  
settlement, as opposed to a jury decision stating who gets what. Eric  
Nelson gave a GREAT, extremely helpful response.

The beneficiaries in my case have now reached an agreement on how to  
apportion.  I assumed that any settlement for “pain and suffering” was  
NOT subject to taxes.  However, on doing research, what the IRS  
material seems to say is that compensation for the pain and suffering  
of the DECEASED as a result of a physical injury is not taxable to the  
estate (unlike the deceased’s lost wages which are taxable). 

The language of RCW 4.20.046 is “(2) In addition to recovering  
economic losses on behalf of the decedent's estate, the personal  
representative is only entitled to recover noneconomic damages for  
pain and suffering, anxiety, emotional distress, or humiliation  
personal to and suffered by the deceased … “

Would you say that this is what the IRS code says, too.   So, If  
deceased died because he/she was depressed because he/she was left by  
spouse- and no physical injury, then that is taxable?  I am looking  
at     26 CFR ss 1.104-1   (see below -  but to be honest, since we  
don't have the hard copy of the CODE here, and I am getting this  
ONLINE, I don't even know if this is good law, if it's been amended,  
revised,  etc.

So, let’s say death was pretty much on impact at the time of the  
accident, a MVA.  No witnesses regarding the pain and suffering of the  
deceased prior to death, is that taxable?  Whether it’s distributed to  
estate or directly to beneficiaries?

andrekita
Law Office of F. Andrekita Silva
1325 Fourth Avenue, Suite 2000
Seattle, Washington 98101
206-224-8288
www.seattle-silvalaw.com

26 CFR ss 1.104-1

§ 1.104-1 COMPENSATION[1] FOR INJURIES OR SICKNESS.
(A) /IN GENERAL./ Section 104(a) provides an exclusion from gross  
income[2] with respect to certain amounts[3] described in  
paragraphs (b)[4], (c)[5], (d)[6] and (e)[7] of this section, which  
are received for personal injuries or sickness, except to the extent  
that such amounts[3] are attributable to (but not in excess  
of) deductions[8] allowed[9] under section 213 (relating to  
medical, etc[10]., expenses) for any prior taxable year[11]. See  
section 213 and the regulations thereunder.
(B) /AMOUNTS RECEIVED UNDER WORKMEN'S COMPENSATION ACTS./ Section  
104(a)(1) excludes from gross income[2] amounts[3] which are received  
by an employee[12] under a workmen's compensation[1] act (such as the  
Longshoremen's and Harbor Workers' Compensation[1] Act, 33 U.S.C.[13],  
c. 18), or under a statute in the nature of a  
workmen's compensation[1] act which  
provides compensation[1] to employees[12] for personal injuries or  
sickness incurred in the course of employment. Section 104(a)(1) also  
applies to compensation[1] which is paid under a  
workmen's compensation[1] act to the survivor or survivors of a  
deceased employee[12]. However, section 104(a)(1) does not apply to a  
retirement pension or annuity to the extent that it is determined by  
reference to the employee[12]'s age or length of service, or  
the employee[12]'s prior contributions, even though the employee[12]'s  
retirement is occasioned by an occupational injury or sickness.  
Section 104(a)(1) also does not apply to amounts[3] which are received  
as compensation[1] for a nonoccupational injury or sickness nor  
to amounts[3] received as compensation[1] for an occupational injury  
or sickness to the extent that they are in excess of  
the amount[3] provided in the applicable workmen's compensation[1] act  
or acts. See, however, §§ 1.105-1 through 1.105-5  
for rules[14] relating to exclusion of such amounts[3] from gross  
income[2].
(C) /DAMAGES RECEIVED ON ACCOUNT OF PERSONAL PHYSICAL INJURIES OR  
PHYSICAL SICKNESS/ -
(1) /IN GENERAL./ Section 104(a)(2) excludes from gross  
income[2] the amount[3] of any damages (other than punitive damages)  
received (whether by suit or agreement[15] and whether as lump sums or  
as periodic payments) on account[16] of personal physical injuries or  
physical sickness. Emotional distress is not considered a physical  
injury or physical sickness. However, damages for emotional distress  
attributable to a physical injury or physical sickness are excluded  
from income[17] under section 104(a)(2). Section 104(a)(2) also  
excludes damages not in excess of the amount paid[18] for medical care  
(described in section 213(d)(1)(A) or (B)) for emotional distress.  
For purposes[19] of this paragraph (c)[5], the term /damages/ means  
an amount[3] received (other than workers' compensation) through  
prosecution of a legal suit or action, or through a  
settlement agreement[15] entered into in lieu of prosecution.
(2) /CAUSE OF ACTION AND REMEDIES./ The section 104(a)(2) exclusion  
may apply to damages recovered for a personal physical injury or  
physical sickness under a statute, even if that statute does not  
provide for a broad range of remedies. The injury need not  
be defined[20] as a tort under state[21] or common law.
(3) /EFFECTIVE/APPLICABILITY DATE./ This paragraph (c)[5] applies to  
damages paid pursuant to a written binding agreement[15], court  
decree, or mediation award entered into or issued[22] after September  
13, 1995, and received after January 23, 2012. Taxpayers[23] also may  
apply these final regulations to damages paid pursuant to a written  
binding agreement[15], court decree, or mediation award entered into  
or issued[22] after September 13, 1995, and received after August 20,  
1996. If applying these final regulations to damages received after  
August 20, 1996, results[24] in an overpayment of tax,  
the taxpayer[23] may file a claim for refund before the period  
of limitations[25] under section 6511 expires. To qualify for a refund  
of tax[26] on damages paid after August 20, 1996, under a written  
binding agreement[15], court decree, or mediation award entered into  
or issued[22] after September 13, 1995, a taxpayer[23] must meet  
the requirements[27] of section 1605 of the Small Business Job  
Protection Act of 1996[28], Public Law 104-188[29] (110 Stat. 1838[30]).

Quoting Donna Calf Robe <DonnaC at brothershenderson.com>:

> Greetings:
>
>     
>
>    Does DOR count recovery for pain and suffering received by the  
> statutory beneficiaries after the injured parties death, as part of  
> the decedents taxable estate?  I’ve been told that it is included  
> but I cannot locate any authority. 
>
>     
>
>    I found IRS rev rulings that the IRS counts it as part of the  
> decedent’s taxable estate but those rulings were for decedents that  
> died in states that have statutes providing that damages for pain  
> and suffering recovered after death pass to the decedent’s estate. 
>
>     
>
>    In Washington the survivorship statute provides at RCW  
> 4.20.046(2) that “In addition to recovering economic losses on  
> behalf of the decedent's estate, the personal representative is only  
> entitled to recover noneconomic damages for pain and suffering,  
> anxiety, emotional distress, or humiliation personal to and suffered  
> by the deceased on behalf of those beneficiaries enumerated in  
> RCW 4.20.020[31]…”  It makes sense that all damages recovered for  
> claims belonging to the decedent, had he survived, would be part of  
> the taxable estate, but the WA statute specifically provides that  
> the funds for pain and suffering only pass to the statutory  
> beneficiaries.   Any authority would be appreciated.
>
>     
>
>    Thanks,  
>
>     
>
>      
>
>     / /
>
>      
>
>     /DONNA/
>
>      
>
>      
>
>      
>
>     Donna M. Calf Robe
>
>      
>
>     Attorney
>
>      
>
>     Brothers & Henderson, P.S.
>
>      
>
>     2722 Eastlake Avenue East, Suite 200
>
>      
>
>     Seattle, Washington 98102
>
>      
>
>     Phone: (206) 324-4300 x113
>
>      
>
>     Fax: (206) 324-3106
>
>      
>
>     e-mail:  donnac at brothershenderson.com
>
>      
>
>     www.brothershenderson.com[32]
>
>      
>
>      
>
>     The information transmitted in this e-mail message and  
> attachments is attorney-client information, is privileged or  
> confidential material and is intended only for the use of the  
> individual or entity named above. You are hereby notified that any  
> disclosure, copying, distribution, review by or taking of any action  
> in reliance on the contents of this e-mail information by  
> unauthorized persons is strictly prohibited. All personal messages  
> are solely the views of the sender and are not to be attributed to  
> Brothers & Henderson, P.S. If you have received this transmission in  
> error, immediately notify the sender by reply e-mail and permanently  
> delete this transmission and all copies including attachments.
>
>      
>
>     
>
>     
>
>     

Links:
------
[1]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=95cc7dcfd44d523b39bbc5898e848d24&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[2]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=738000a3c4dedccb805a8fb4d9377fb2&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[3]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=661fb5529bda5e7b12e0c516a1a1473f&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[4]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=6aef00213f9cf73eb008d8bb08598aca&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[5]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=05ab4cc0bf13cc5bcef83d3950eefb63&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[6]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=78ef4a7ec4a9e68106ed263f66d68ba6&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[7]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=851a2ecc7381ad353031e745321ca2ce&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[8]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=f917901de6379998342cf498d0de4ad0&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[9]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=88bc621669e0e301f18847de820acec8&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[10]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=5446184fc5a2c478f40fa162e771c46a&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[11]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=8a2837bd45f19a50d5183d6f43bb65dc&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[12]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=5d8fbd8ea279aa8f9f55233cd860b35d&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[13] https://www.law.cornell.edu/uscode/text/33
[14]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=46bcdb5568d6a75306ff954291e17ab8&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[15]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=8008bf4f45a636da984cc2b6961aaf95&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[16]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=c3b57a31fc226d7b84e26175afe251f2&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[17]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=1c07283120860b02c14e93d17bce07df&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[18]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=28deb181f824e2c48947311ef2dcf282&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[19]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=0ad2de56cb198dce23b0b55179137f16&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[20]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=9bc15e20ef3eaa4f45fd661aa756d465&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[21]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=8a5270feb074ea85e9ec5ce707357490&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[22]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=1249d9d69e1a86d8465c44a1c5d4729c&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[23]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=a1d17b090573400bd6a03dd4fbedfbdc&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[24]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=ca3fae183f466ef520f59615d7671264&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[25]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=615db3161c5a297288116997c50753ae&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[26]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=693eb7bd585b134e1753fcfbcd33893f&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[27]  
https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=2c2a541db9f51c5abe91357b5f4bbf2d&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:4:1.104-1
[28]  
https://www.law.cornell.edu/topn/small_business_job_protection_act_of_1996
[29] https://www.law.cornell.edu/rio/citation/Pub._L._104-188
[30] https://www.law.cornell.edu/rio/citation/110_Stat._1838
[31] http://app.leg.wa.gov/RCW/default.aspx?cite=4.20.020
[32] http://www.brothershenderson.com/

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20200828/95af635e/attachment.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image001.jpg
Type: image/jpeg
Size: 3164 bytes
Desc: not available
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20200828/95af635e/image001.jpg>