Abstract

http://ssrn.com/abstract=1934282
 


 



Making Plaintiffs Whole: A Tax Problem of Interest


William E. Foster


University of Arkansas - School of Law

September 27, 2011

Oklahoma Law Review, Vol. 64, No. 3, 2012

Abstract:     
This article illustrates the dramatic tax impact of interest awards in otherwise non-taxable litigation recoveries and proposes two alternative legislative solutions for the over-taxing of plaintiffs in these cases. While plaintiffs who recover personal injury awards typically receive favorable tax treatment, those who receive interest on such awards are taxed on the interest and often are not able to utilize deductions for attorney’s fees and other costs paid to obtain the award. Further, the attorney’s portion of the recovery in a contingency fee arrangement will also be included in the plaintiff’s gross income. The result is that the plaintiff recovers less of the interest than the Treasury or her attorney, preventing the plaintiff from truly being made whole. After reviewing the historical and theoretical framework that produces these results, I suggest previously-proposed judicial solutions to the problem are impracticable and a legislative solution is necessary. I conclude with a proposal for two alternative legislative solutions - an expanded deduction and an exclusion - to provide relief for plaintiffs recovering partially taxable awards and to achieve the policy of fully compensating injured plaintiffs.

Number of Pages in PDF File: 51

Keywords: tax, income, attorney's fees, damages, personal injury

Accepted Paper Series


Download This Paper

Date posted: September 29, 2011 ; Last revised: March 28, 2013

Suggested Citation

Foster, William E., Making Plaintiffs Whole: A Tax Problem of Interest (September 27, 2011). Oklahoma Law Review, Vol. 64, No. 3, 2012. Available at SSRN: http://ssrn.com/abstract=1934282 or http://dx.doi.org/10.2139/ssrn.1934282

Contact Information

William E. Foster (Contact Author)
University of Arkansas - School of Law ( email )
260 Waterman Hall
Fayetteville, AR 72701
United States

Feedback to SSRN


Paper statistics
Abstract Views: 631
Downloads: 98
Download Rank: 157,404

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.312 seconds