[WSBARP] Tax on trespass damages

[John J. Sullivan]

Deric: 

The request for a W-9 is not a determination of taxability, but merely a determination that the payment is reportable on a Form 1099-MISC. Give them the W-9. 

Who will prepare the client’s return? Client should consult with CPA or tax attorney to determine whether damages payment is taxable. Generally, damages are non-taxable if characterized as ror “personal injury.” That’s why the tax attorney should be consulted at the characterization stage and when drafting a settlement agreement or proposed order. 

“ Terminology/Definitions Types of Claims

Tort:

 A civil wrong, not involving breach of contract, for which a remedy may be obtained;
 A wrongful act committed by one person against another person or his/her property;
 The breach of a legal duty imposed by law, other than by contract;
 May cause or constitute, but is not necessarily, a personal injury.

A tort award may be received from litigation or settlement of a claim for physical injury or illness, mental pain and suffering, interference with economic relations, and/or property damage.

Example 1
X punches Y, thus committing the tort of battery.

Example 2
X sets foot on Y‟s property, thus committing the tort of trespass, but causing no personal injury.”

https://www.irs.gov/pub/irs-utl/lawsuitesawardssettlements.pdf

How were the damages characterized?

https://trespass.uslegal.com/damages/

https://ideaexchange.uakron.edu/cgi/viewcontent.cgi?article=2489&context=akronlawreview

John J. Sullivan

Sent from my iPad

> On Jun 28, 2021, at 7:34 AM, Deric Young <Deric at hbjlaw.com> wrote:
> 
> 
> We have an adverse possession claim coupled w/ a trespass claim for damages.  Tentative settlement w/ client receiving property they adversely possessed  which includes $9,000.00 in damages for the trespass. The defendants insurance company is requesting a W-9 claiming the damages are subject to being taxed. I’ve never had a insurance company claim trespass damages are taxable. This is not income related. Thoughts?
> Sincerely,
>  
> Deric N. Young, Attorney at Law
> Jack W. Hanemann, P.S.
> 2120 State Ave N.E., Suite 101
> Olympia, Washington  98506
> Phone: (360) 357-3501
> Fax: (360) 357-2299
> Email:  deric at hbjlaw.com
>  
> This e-mail message and any attachments are confidential and may be privileged.  If you are not the intended recipient, please notify deric at hbjlaw.com immediately by replying to this message and destroy all copies of this message including all attachments.
>  
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