Is payment for severing Right to sue taxable?

Payment for almost anything is taxable, unless it is exempt.

But what do you mean by severing rights to sue? Do you mean waiving the right to sue? Severe means to split off - what are you splitting the right to sue off of?

___ Stu

I'm not sure what you are asking.. but many settlements include a clause that says the plaintiff accepts the settlement and gives up the right to sue. In the case of the Gulf settlement: if you accept the offer you give up the right to sue. If the payment is for lost wages, lost business income, lost profits it is taxable. If the payment is for property damage, it is not taxable as long as the payment does not exceed the cost basis.

For more info on the BP settlement see the IRS website at: