Derrick was in an automobile accident while he was going to work. The doctor advised him to stay home for eight months due to his physical injuries. The resulting lawsuit was settled and Derrick received the following amounts: How much of the settlement must Derrick include in ordinary income on his tax return?

Question

Derrick was in an automobile accident while he was going to work. The doctor advised him to stay home for eight months due to his physical injuries. The resulting lawsuit was settled and Derrick received the following amounts:  How much of the settlement must Derrick include in ordinary income on his tax return?

Quizplus · Accepted Answer

Compensatory damages for physical injuries are not taxable, but the punitive damages are taxable.

Derrick Was in an Automobile Accident While He Was Going