Abstract

http://ssrn.com/abstract=1403248
 
 

Footnotes (153)



 


 



Taxing Structured Settlements


Gregg D. Polsky


University of North Carolina (UNC) at Chapel Hill - School of Law

Brant J. Hellwig


University of South Carolina - School of Law

May 12, 2009

Boston College Law Review, Forthcoming
FSU College of Law, Public Law Research Paper No. 373

Abstract:     
Congress has granted a tax subsidy to physically injured tort plaintiffs who enter into structured settlements. The subsidy allows these plaintiffs to exempt from the tax the investment yield imbedded within the structured settlement. The apparent purpose of the subsidy is to encourage physically injured plaintiffs to invest, rather than presently consume, their litigation recoveries. While the statutory subsidy by its terms is available only to physically injured tort plaintiffs, a growing structured settlement industry now contends that the same tax benefit of yield exemption is available to plaintiffs’ lawyers and non-physically injured tort plaintiffs under general, common-law tax principles. If the structured settlement industry is correct, then all tort plaintiffs and their lawyers may invest their litigation proceeds in a tax-free manner simply by using structured payment arrangements Structured arrangements would therefore be far superior to traditional tax-favored retirement accounts (e.g., 401(k)s, IRAs), which provide the same tax benefit of yield exemption but are subject to significant constraints. Accordingly, if proponents of structured arrangements are correct in their interpretation of the tax law, these arrangements can be described as “super-IRAs,” because they provide full yield exemption without any corresponding limitations or restrictions. This Article examines the taxation of structured payment arrangements, ultimately concluding that the structured settlement industry’s positions are unpersuasive. Nevertheless, because of the muddled state of the tax law on the issue, the Article recommends legislative and administrative action to close the yield exemption loophole with respect to its unintended beneficiaries.

Number of Pages in PDF File: 50

Accepted Paper Series





Download This Paper

Date posted: May 21, 2009 ; Last revised: September 23, 2009

Suggested Citation

Polsky, Gregg D. and Hellwig, Brant J., Taxing Structured Settlements (May 12, 2009). Boston College Law Review, Forthcoming; FSU College of Law, Public Law Research Paper No. 373. Available at SSRN: http://ssrn.com/abstract=1403248

Contact Information

Gregg D. Polsky (Contact Author)
University of North Carolina (UNC) at Chapel Hill - School of Law ( email )
Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
Brant J. Hellwig
University of South Carolina - School of Law ( email )
Main & Greene Streets
Columbia, SC 29208
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,344
Downloads: 169
Download Rank: 104,406
Footnotes:  153
Paper comments
No comments have been made on this paper

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.328 seconds