2012 Update

The 2012 Update to Taxation of Damage Awards and Settlement Payments, 4th Edition, brings readers up to date on judicial, Congressional and IRS developments in this ever-changing area. Highlights include:

New Cases and Rulings

The latest cases, rulings, regulations, IRS notices, and announcements, affecting the entire spectrum of tax issues in litigation.

Domeny and Parkinson

Two new major cases elaborate on the nebulous definition of physical sickness. See ¶ 2.4[C], Physical Sickness.


New cases on the treatment of damages in matters relating to race, sex, and age discrimination. See ¶ 3.3, Discrimination Based on Race, Sex, or Age, and ¶6.3[E][1], Taxpayer’s Burden of Proof.


An expanded discussion of the tax treatment of restitution payments by the payor. See ¶ 7.3[G], Restitution.

IRS Lawsuit Audit Guide

The new 2011 release of the IRS Lawsuit Audit Guide discusses among other new developments, the classification of front pay and back pay as wages. See ¶ F[J], Lawsuit Awards and Settlements (From Internal Revenue Manual).

Estate Legal Settlements

A new analysis of the tax consequences of estate legal settlements. See ¶ 7.8, Other Payor Deduction Issues.

Section 104

A revised and expanded discussion of the scope of Section 104 with new examples and interpretations. See Chapter 2, Personal Physical Injury and Sickness Recoveries.