* Only the net amount of damages received from qualified settlement funds is included in gross income.
This category encompasses claims that fall outside sections 62(a)(20) and 104(a)(2) but under either fee-shifting statutes, where the court awards legal fees directly to counsel, or "qualified settlement funds" covered by Treasury regulations section 1.468B-1.
A qualified settlement fund must meet three criteria:
A qualified settlement fund gives plaintiff attorneys a tool to combat abusive or self-serving insurance carriers.
Qualified settlement funds
, which are generally established to administer a litigation judgment or settlement to a class of plaintiffs, are subject to a myriad of income tax paying, reporting and withholding requirements.
Wood has written a new book, "Qualified Settlement Funds
and Section 468B" ...
IRS guidance: In a series of letter rulings, (16) the Service ruled that contingent attorneys' fees paid from qualified settlement funds
, as defined by Sec.
Specifically, this includes exceptions to reporting of payments to payee attorneys who were acting as (1) settlement attorneys or title insurers in real estate trasactions, (2) executors or estate administrators (e.g., those receiving payments of life insurance proceeds), (3) trust trustees (e.g., pension plans and bankrupt estates) and (4) administrators of qualified settlement funds
468B dealing with qualified settlement funds
did not provide guidance for accounts and funds governed by Sec.