Legal Question in Tax Law in Alabama

Settlement Income Subject to Income Tax?

I was awarded a settlement in a civil action case involving an insurance company who was falseley representing life insurance policies as retirement or savings plans. Monies I paid into this policy were based on after-tax income as opposed to pre-taxed. The settlement amount I was awarded was based on the amount of money I contributed to the "program" and the length of time I had the policy. What portion of the settlement, if any, is taxable and if so at what tax rate?


Asked on 10/24/99, 9:40 pm

2 Answers from Attorneys
MYRON LEWIS MYRON LEWIS

Re: Settlement Income Subject to Income Tax?

If the Insur. Comp. sends you a "Form 1099" for Misc. Income by 4/15/2000, you pick up that portion as income on your tax return. If they send you nothing, you may be home free...nothing as income reported to you!!

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Answered on 10/26/99, 8:43 am
Lawrence Graves Coolidge & Graves PLLC

Re: Settlement Income Subject to Income Tax?

Irrespective of how the insurance company elects to characterize the transaction, you are entitled to the return of your investment capital free of tax. Anything above that is taxable.

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Answered on 10/26/99, 3:22 pm


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