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Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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my husband is settling a lawsuit out of court. hell be receiving

Resolved Question:

my husband is settling a lawsuit out of court. he'll be receiving a lump sum cash settlement. the lawsuit is against his 2 former business partners and the 2 realty trusts that own 2 pieces of commercial property. what taxes are assessed on this type of settlement?
Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.
Hello gottaknow,



The only awards or settlements which are not subject to tax are settlements awarded for personal injury or wrongful death. Any other type of settlement must be included in your taxable income.



You husband, may however, deduct any attorney fees he had in connection with securing this settlement.



If this was helpful please press the Accept button. Positive feedback is also appreciated.



Thank you gottaknow.



Customer: replied 7 years ago.
you said settlement must be included in his taxable income. since he is basically selling his shares in the property back to the realty trust that owns the property, would his settlement be taxed as capital gains/would any portion of it be considered capital gains or would settlement be taxed as income totally? If capital gains, at what rate would he be assessed?
Expert:  Merlo replied 7 years ago.
Hello again gottaknow,

If this settlement is being paid in consideration of the sale of his shares in this property, then this is treated as a capital gain.

The current long term capital gains tax rate is capped at 15%, so that is the most he would pay on this settlement.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you gottaknow.

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