Question

1) John sued a previous client for a spinal injury at work in 2010. Resulting from the injury in 2011, he received $400,000 for his loss in future income, 200,000 in punitive damages because of neglect, $100,000 in emotional distress from injury and $20,000 for medical expenses. The medical expenses were deducted on his 2010 return reducing her taxable income by 12,000. Compute johns gross income in 2011. 2) how would your answer change to part 1, if the lawsuit was related to slander and defamation? Ignore the $20,000 in medical expenses.

Answer 1

1 Calculation of Gross Income on 2011:

Special Compensatory Damages - Loss in future income = 4,00,000

+Punitive Damages = 2,00,000

+Wrongful Death Damages - emotional distress = 1,00,000

+Medical expenses = 20,000

Total Gross Income : $7,20,000

2. Defamation can occur when someone makes a false statement about you, and your reputation suffers harm as a result.

Actual damage + Punitive damage + Presumed damage

Calculation of Gross Income due to slander and defamation:

Special Compensatory Damages - Loss in future income = 4,00,000

+Punitive Damages = 2,00,000

Total Gross Income : $6,00,000

Medical expenses ignored as given in the question.