Tort Lawyers & Taxes
Most tort lawyers, both plaintiff and defendant, are not knowledgeable about tax consequences. Counsel for plaintiffs who are seeking punitive damages should carefully advise their clients of the tax consequences of the recovery of punitive damages if they know enough, or should require that each plaintiff seek the advice of a tax professional before agreeing to proceed with a suit or trial seeking punitive damages. If the Greenbergs had consulted with tax lawyers and been advised that they would be required to pay the top tax rate on the full amount of punitive damages awarded to them (even though 40 percent to 50 percent of those damages were paid as part of the contingency fee agreement with their lawyers), they might have agreed to the defendants’ settlement offers that did not include punitive damages.
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