[id10t]

Hrm... I'd definately ask both your lawyer and a money guy about this - a quick google indicates that lawsuit winnings that are compensation aren't taxed and punitive damages are ...

Quoth the google -

The winnings would be taxable income if they are "punitive". If they
are "compensatory," they are non-taxable. Internal Revenue Code (IRC)
section 61 states that all income from whatever source is taxable.

However, compensatory settlements would be to compensate for a prior
loss on the part of a plaintiff, and so would not represent a gain of
income on their part and they would not have to be taxed.

An IRS study found that many lawsuit winnings were falling through the
cracks as reportable income, or that people were classifying
non-compensatory settlements as compensatory, so there are many ways
to get around this.

IRS Code 104(a)(2) states that lawsuits involving personal injury or
illness are excluded from taxation, but the IRS has found many cases
of fraud related to this and there are many court cases stemming from
it. Issues litigated have included whether mental anguish counts as a
personal sickness or injury, or whether personal injury damages are
actually punitive. "The Service's current position is that punitive
damages are not received on account of personal
injuries under IRC section 104(a)(2), and therefore are not excludable
from gross income."
http://www.irs.gov/pub/irs-mssp/a9lawsut.pdf

Other than that, there are no specific statutes on which types of
lawsuits are exempt or not. Most cases have elements of both kinds of
compensation. The courts at the time of settlement deem whether the
money is compensatory or punitive, and the plaintiff must abide by
that ruling.
The winnings would be taxable income if they are "punitive". If they
are "compensatory," they are non-taxable. Internal Revenue Code (IRC)
section 61 states that all income from whatever source is taxable.

However, compensatory settlements would be to compensate for a prior
loss on the part of a plaintiff, and so would not represent a gain of
income on their part and they would not have to be taxed.

An IRS study found that many lawsuit winnings were falling through the
cracks as reportable income, or that people were classifying
non-compensatory settlements as compensatory, so there are many ways
to get around this.

IRS Code 104(a)(2) states that lawsuits involving personal injury or
illness are excluded from taxation, but the IRS has found many cases
of fraud related to this and there are many court cases stemming from
it. Issues litigated have included whether mental anguish counts as a
personal sickness or injury, or whether personal injury damages are
actually punitive. "The Service's current position is that punitive
damages are not received on account of personal
injuries under IRC section 104(a)(2), and therefore are not excludable
from gross income."
http://www.irs.gov/pub/irs-mssp/a9lawsut.pdf

Other than that, there are no specific statutes on which types of
lawsuits are exempt or not. Most cases have elements of both kinds of
compensation. The courts at the time of settlement deem whether the
money is compensatory or punitive, and the plaintiff must abide by
that ruling.