Law Commons^™

Taxing Litigation: Federal Tax Concerns Of Personal Injury Plaintiffs And Their Lawyers, Gregg Polsky

Scholarly Works

This Article addresses the federal tax concerns ofpersonal injury plaintiffs and the lawyers who represent them, typically on a contingencyfee basis. It explains when plaintiffs' recoveries are taxable for income and employment tax purposes and whether and how those recoveries are required to be reported by defendants to the IRS. It also discusses whether attorney's fees and costs are deductible by plaintiffs.

In addition to these tax planning and compliance issues, the Article also considers when tax evidence might be admissible. Plaintiffs and defendants often try to introduce tax evidence in an effort to increase or decrease, respectively, the amount …

Taxing Punitive Damages, Gregg D. Polsky, Dan Markel

Scholarly Works

There is a curious anomaly in the law of punitive damages. Jurors assess punitive damages in the amount that they believe will best “punish” the defendant. But, in fact, defendants are not always punished to the degree that the jury intends. Under the Internal Revenue Code, punitive damages paid by business defendants are tax deductible and, as a result, these defendants often pay (in real dollars) far less than the jury believes they deserve to pay.

To solve this problem of under-punishment, many scholars and policymakers, including President Obama, have proposed making punitive damages nondeductible in all cases. In our …

Revisiting The Taxation Of Punitive Damages, Gregg D. Polsky, Dan Markel

Scholarly Works

In our recent article, Taxing Punitive Damages, available at http://ssrn.com/abstract=1421879, we argued (1) that plaintiffs in punitive damages cases should be allowed to introduce to the jury evidence regarding the deductibility of those damages by defendants, and (2) that this jury tax-awareness approach is better than the Obama Administration’s suggested alternative of disallowing those deductions.

To our delight, Professor Larry Zelenak and Paul Mogin have each provided published comments to our piece on Virginia Law Review's In Brief companion website. Professor Zelenak’s thoughtful response focuses on our prescriptive claim that jury tax-awareness is better than nondeductibility, while Mr. Mogin disputes …