Quote:
Originally Posted by berettafan
on a serious note Dueller why isn't it common practice for atty's to file two lawsuits; one for the atty and one for the client? the issue of course being that the client gets to put the entire award on their tax return and the payment to the atty (say 1/3) gets put on the sch. a which gets phased out once dollars get big.
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Compensatory damages are not taxable. That is, if damages/losses can be proven, there is no gain and hence no tax. It's punitive damages that are taxable.
However, the award amount to the client is not the taxed figure. Once the award amount is determined, the check can be a) cut to the attorney, who then deducts fees, etc. and the balance is then given to the client (and the balance is the taxable figure) or b) the defendant writes two checks, one to the atty and the other to the plantiff. No need for two suits, it's all about how the checks are written.
Remember, it is the receipt of money that is a taxable event, not the promise of money. Think appeals, defendants not paying, etc.