The Tax Treatment of Verdicts and Settlements Following the Adoption of the Jobs Creation Act of 2004: Paradise Found for the Employment Lawyer?
Fatino, John F.
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In recent years, attorneys practicing in the employment area have found that a working knowledge of tax law is critical to maximize results for clients and to avoid malpractice. This article will examine the status of taxation of verdicts and settlements following adoption of 1996 legislation, which made various changes to the Internal Revenue Code. In addition, the article will examine the impact that the American Jobs Creation Act has had on the tax treatment of attorney fees and court costs in the context of employment litigation. Finally, the article will discuss the implications of a recent decision by the United States Court of Appeals for the D.C. Circuit concerning the unconstitutionality of the taxation of verdicts and settlements involving emotional distress and loss of reputation.