Legal Question in Tax Law in California

There is no difference. Any money you receive for lost income, profits or wages is technically taxable [relatively small sums are not brought to the attention of the IRS], but the rest is not. If it was taxable without someone being responsible for causing the damage, then it is still taxable if someone else is legally responsible for the losses that are reimbursed to you. The costs you have in obtaining the recovery is deductible as an expense. A smart attorney will often divide the recovery up attributing as little to taxable income as possible.