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Subject Author Date
taxes on lawsuit settlements/legal fees Woody 05-06-2008
Posted by Stuart Bronstein on May 10, 2008, 6:43 pm
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>
>> Neither. You have money in your bank account that you received
>> in past years and have paid tax on it. Someone (in a consumer
>> transaction) sells you something that turns out to be worthless,
>> so you pay for it with money in that same bank account. When you
>> sue for it later you receive a judgment for your money, but after
>> paying your lawyer you only get two-thirds back.
>>
>> There is no tax on recovery of the money, but after paying
>> attorneys fees you are still in the hole. Can you deduct those
>> fees in that case?
>>
> Why would you get only 2/3 back?

There are various reasons. One is that in the US judgments generally
don't include an award of attorneys fees unless there is a law or
contract to specifically provides for it. In other words, you pay your
lawyer out of your winnings. The other party doesn't.

Stu

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Posted by Han on May 11, 2008, 2:31 am
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>>
>>> Neither. You have money in your bank account that you received
>>> in past years and have paid tax on it. Someone (in a consumer
>>> transaction) sells you something that turns out to be worthless,
>>> so you pay for it with money in that same bank account. When you
>>> sue for it later you receive a judgment for your money, but after
>>> paying your lawyer you only get two-thirds back.
>>>
>>> There is no tax on recovery of the money, but after paying
>>> attorneys fees you are still in the hole. Can you deduct those
>>> fees in that case?
>>>
>> Why would you get only 2/3 back?
>
> There are various reasons. One is that in the US judgments generally
> don't include an award of attorneys fees unless there is a law or
> contract to specifically provides for it. In other words, you pay your
> lawyer out of your winnings. The other party doesn't.
>
> Stu

I understand that you need to pay the attorneys/lawyers, but shouldn't
the award be for an amount that assures that? Isn't there aneed to
recover attorney's fees in this case of (whatever it should be called,
but it sounds like fraud, or at least misrepresentation or lack of
performance)?

--
Best regards
Han
email address is invalid

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Stuart Bronstein on May 12, 2008, 9:19 pm
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>> There are various reasons. One is that in the US judgments
>> generally don't include an award of attorneys fees unless there
>> is a law or contract to specifically provides for it. In other
>> words, you pay your lawyer out of your winnings. The other party
>> doesn't.
>
> I understand that you need to pay the attorneys/lawyers, but
> shouldn't the award be for an amount that assures that? Isn't
> there aneed to recover attorney's fees in this case of (whatever
> it should be called, but it sounds like fraud, or at least
> misrepresentation or lack of performance)?

The "American rule" (as opposed to the English rule and perhaps the
rule in other jurisdictions but I am not aware of them) is that a
winning litigant will not recover an award of attorney's fees unless
there is a contract or a statute the provides for it. In most
situations (other than commercial or consumer transaction) there is no
such law or contract.

Stu

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Han on May 12, 2008, 10:20 pm
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>
>>> There are various reasons. One is that in the US judgments
>>> generally don't include an award of attorneys fees unless there
>>> is a law or contract to specifically provides for it. In other
>>> words, you pay your lawyer out of your winnings. The other party
>>> doesn't.
>>
>> I understand that you need to pay the attorneys/lawyers, but
>> shouldn't the award be for an amount that assures that? Isn't
>> there aneed to recover attorney's fees in this case of (whatever
>> it should be called, but it sounds like fraud, or at least
>> misrepresentation or lack of performance)?
>
> The "American rule" (as opposed to the English rule and perhaps the
> rule in other jurisdictions but I am not aware of them) is that a
> winning litigant will not recover an award of attorney's fees unless
> there is a contract or a statute the provides for it. In most
> situations (other than commercial or consumer transaction) there is no
> such law or contract.
>
> Stu
>
Thanks, Stu.


--
Best regards
Han
email address is invalid

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by D. Stussy on May 13, 2008, 7:50 pm
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> >> There are various reasons. One is that in the US judgments
> >> generally don't include an award of attorneys fees unless there
> >> is a law or contract to specifically provides for it. In other
> >> words, you pay your lawyer out of your winnings. The other party
> >> doesn't.
> >
> > I understand that you need to pay the attorneys/lawyers, but
> > shouldn't the award be for an amount that assures that? Isn't
> > there aneed to recover attorney's fees in this case of (whatever
> > it should be called, but it sounds like fraud, or at least
> > misrepresentation or lack of performance)?
>
> The "American rule" (as opposed to the English rule and perhaps the
> rule in other jurisdictions but I am not aware of them) is that a
> winning litigant will not recover an award of attorney's fees unless
> there is a contract or a statute the provides for it. In most
> situations (other than commercial or consumer transaction) there is no
> such law or contract.

>From memory:
For U.S. District Court or Court of Claims, see FRCP 54. However, one has
to specifically ask for costs - it's not automatic.
For U.S. Tax Court, the IRC has a section which governs when cost recovery
can be made.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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