Suppose I appear on Judge Mathis' TV courtroom?

Not tax advice, but you should get some actual today values of similarly diminished values to help prove your case.

Judge Mathis is an arbitrator, not a judge, so it isn't exactly small claims court, and "findings of fact" are not evidence of loss for the IRS.

Everything, including the $1500, is nominally a taxable appearance fee, taxable for US purposes, your state of residence, and IL. (I don't think Chicago has a city income tax.) _If_ you obtain a legitimate forensic appraisal, determining the value of the car before and after the accident, you can calculate the casualty loss or gain associated with the total payment, including both repairs and that part of the $1500 you receive in "court". The IRS doesn't care about "inherent diminished value", only about the value before and after the accident (and basis). I don't know if Judge Mathis cares about "inherent diminished value" -- his analysis might also be based on the value of the car before and after the accident. I don't know if a _real_ judge would care about "inherent diminished value" -- you could ask a _real_ lawyer, but it would probably cost you more than $1500.

-- Arthur L. Rubin, CRTP, AFSP Brea, CA

On Monday, June 5, 2017 at 5:52:44 PM UTC, Arthur Rubin wrote: I don't know if a _real_ judge would care about "inherent diminished value" -- you could ask a _real_ lawyer, but it would probably cost you more than $1500.

(A) - Judge Mathis is out. I wouldn't be able to get the time off anyway. This was primarily a "what if" tax question. (B) - My objective is to become whole. The car is obviously worth less, but how much less? So far, I have hearsay estimates from VW sales managers, but it will probably cost me $200 and two days to get documentation that could be used in court. My only advantage is that it is costly for the other party's insurance company to appear in court.

In NYS small claims judges can do whatever they want, irrespective of the law. The law is that shots in the dark that are unknown until you sell the car in the future are losers.

Generally speaking, compensation for damages are not taxable. (I am right about that, aren't I?)

Generally speaking, compensation for damages to property, not used for repair, results in a reduction in basis. In the case of a car, that's probably not taxable.

-- Arthur Rubin, CRTP, AFSP Brea, CA

Frustrated wrote in news: snipped-for-privacy@googlegroups.com:

Generally? No. Compensation for some damages may be taxable and for other damages may not be. One way to look at it is whether the loss being compensated was subject to income tax at some point in the past.

If you have personal injury damages, medical bills and the like are not considered taxable compensation. But if you also recover money for wages you would have earned but couldn't as a result of your condition, that is taxable.

If you have antiques that are worth a lot more than when you bought them, and insurance compensates you for that loss, the difference between what you paid for them and what you receive may be taxable.

Stu