Tax status of lawsuit settlements

If you were reimbursed for legal and accounting expenses, wouldn't they counteract the income, as a business expense, against the business income. Same for the second case. Now, if you received money for pain, mental suffering and loss of use of your time, that is probably taxable income.

Just because you are dealing with a business doesn't mean your own expenses are deductible - you may be dealing with the business in your personal capacity. You do that whenever you shop for food or clothes.

OP said that the expenses that were reimbursed were not deductible, so they are probably not business expenses.

Compensation for loss of use of his time would be taxable. But again, he said the recovery was to reimburse him for out of pocket expenses.

Normally reimbursements are not taxable since they are only making the person whole again. However if he was compensated for attorney's fees, that may not be excluded.

wrote in message news: snipped-for-privacy@googlegroups.com... I settled two lawsuits in 2014. In the first, a company that issued a fraudulent 1099 agreed to reimburse me for my legal and accounting expenses associated with persuading them to correct it. In the second a professional reimbursed me for unnecessary expenses that resulted from his negligent advice. In neither were my expenses deductible. As I see it, both were reimbursement for damages of aftertax money, so they are not taxable. Is it that simple, or is there more to it? ========== Under the tax recovery doctrine of Section 111, it can be that simple. No deduction => no inclusion of the recovery.