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I have a tax question. I sued for return of a club deposit

and return of dues that...
I have a tax question. I sued for return of a club deposit and return of dues that were improperly charged and paid. How should I handle the payment for tax purposes? If I am able to settle how should I have them structure the payment for the best tax treatment?
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Answered in 9 minutes by:
11/17/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Megan C :

Thank you for your question, my name is XXXXX XXXXX I will be happy to help you

Megan C :

For your settlement, the amount that you are refunded for your club deposits - fees that you paid and are getting reimbursed for, are tax free

Megan C :

You are only taxed on the punitive damages, or interest that you receive

Megan C :

So, if your settlement is your club deposit plus $5,000 you are only taxed on that $5,000

Megan C :

You can read about the taxation of settlements, HERE

Megan C :

Do you have any questions about this matter?

Megan C :

if no further questions, please rate positive so that I may receive credit for assisting you today

Megan C :

I see where we are having trouble in live chat. I'm going to switch to Q&A mode, and maybe this will help you view the response. If you have any questions, please feel free to reply below.

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Customer reply replied 4 years ago


  1. Thank you.... In the attachment you sent it lists the following to include as ordinary income: Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. Is there an offsetting deduction for these expenses?



Thank you for your follow up. Yes, you can deduct legal fees as an itemized deduction. So, if you itemize, there is an offsetting deduction.

Thanks and let me know if you need anything additional. If not, please rate positive so that I may receive credit for assisting you today.
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Megan C
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
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Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

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