In this weeks edition of Speaking of Settlements I am joined by an old friend, but also the host of the newest channel on The Legal Broadcast Network, The Tax Law Channel. Attorney Robert Wood. We discuss the updated thinking on taxation of molestation and sexual abuse cases, an area that has been of increasing interest in the settlement and legal community.
The entire podcast on taxation of molestation cases with Rob Wood and Mark Wahlstrom is available by clicking the audio player at the end of this post.
What prompted this update was some recent discussion in the structured settlement world about a ruling earlier this year from Treasury that further clarified the documentation needed for an injured party to qualify for tax free status under section 104 under the "observable harm" standard. That ruling, Treasury ILM 20071127, discussed the issue of how a taxpayer handles taxation when the abuse occurred so long prior to the settlement that records or proof of observable harm are unavailable. In what can only be described as good news, the Treasury gave the taxpayer a break and said the presumption would be in favor of the taxpayer in that case, due to the passage of time.
As the podcast cautions however, in current cases, particularly with this new guidance, the necessity of plaintiff, attorney and tax professional to carefully retain and document evidence that meets the observable harm standard is going to be essential to get this favorable tax treatment. You can go to Robert Wood's page on The Tax Law Channel to learn more, obtain resources or comment on the show.
Listen to the podcast of this weeks edition of Speaking of Settlements.