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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (92596)	12/28/2004 2:06:02 PM
From: LindyBill	Read Replies (3) \| Respond to of 793781

Hitting the ATM to pay the AMT. Agitator blog One of the odd Supreme Court cases just heard last term involves the IRS's assertion that it can tax victorious plaintiffs for damages they win in lawsuits, including attorneys fees (that is, the plaintiffs must pay tax on the 40% of so their lawyers take for torts cases). When damages are lowered on appeal, as sometimes happens, you get the absurd scenario where a victorious plaintiff owes the IRS more -- sometimes significantly more -- in taxes than s/he was awarded in damages. That's mostly because of the silly Alternative Minimum Tax, which was instituted to soak rich taxpayers who manage to hide much of their income in deductions. The attorneys in these cases of course make off with the 40%. Congress ameliorated the situation last year by exempting many damages from taxable income in the American Jobs Creation Act. But it didn't exempt all damages, and wasn't retroactive. So people who've already been screwed by the AMT's best hope is this Supreme Court case. How the IRS was ever allowed to interpret damages -- which are intended to "make whole" someone who was wronged and by definition aren't income -- as taxable income is beyond me. But that they were, and did, is a neat example of the absurdities of the tax code, IRS money grabs, and tort law all rolled into one.