The lawyers will pay tax on the money they received.
You might or might not be able to deduct the costs of litigation.
It depends upon what the lawsuit was about. You can deduct costs for business claims, some discrimination claims, etc.
Also settlements for physical injuries or sicknesses are not taxable income at all.
This is a *very* complicated area. You should probably seek the advice of a CPA, tax attorney, or enrolled agent who is knowledgeable about this.
This is a article on the subject. https://www.nolo.com/legal-encyclopedia/question-won-lawsuit-pay-tax-award-28353.html
This is another article about some of the issues, but it is very technical. It might help you understand some of the issues. http://www.acc.com/legalresources/quickcounsel/litigation-damages-and-settlements.cfm
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