You've really not provided enough information here to allow anyone to answer with a "yes" or "no."
If you had been paying "her" properly all along, such that the lawsuit wasn't necessary if the first place, would the amounts be deductible to you? Like maybe salary or wages against business income? If so then the amounts you are paying her probably are deductible now and the amounts would be some sort of "income" to "her."
Tom Young
