Are Court Awards and Settlement Proceeds Taxable?

Louis J. Cercone, CPA, CFE, CFF, ABV, ASA, CVA

When you receive an out-of-court settlement or court-ordered award, you might not know how to classify it for federal income tax purposes. Don't assume it will be tax-free without discussing matters with a tax professional. The rules are complex and taxpayers bear the burden of proving that an amount should be excluded from gross income.

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