Question

Tax on a settlement

Forum|Forum|4 years ago
April 8, 2022
1 reply
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My mother was injured due to negligence from her nursing home. A settlement was negotiated after her death and will be paid to her children. Is the settlement amount taxable?

Not A Product Question

ColeenD3

It depends. Was it for physical injury? The general rule of taxability for amounts received from the settlement of lawsuits and other legal remedies is Internal Revenue Code (IRC) Section 61 which states all income is taxable from whatever source derived unless exempted by another section of the code.

The rule is if it were taxable to the deceased, it is taxable to the recipient.

Please see this LINK for the IRS position on settlements.