lemon law buyback settlement taxes, etc.

[yo2025]

We settled on a lawsuit with a car manufacturing co. the lawyer is the one that mailed and paid the proceeds to us. but we got a 1099 misc. from the manufacturing car co. for the full amount of the settlement. SO WHAT can I deduct from the proceeds if the amount we received is less than the amount of the 1099?

the lawyer sent the following with the check: (Not actual figures)

total damages                                $ 122K ($44K actual damages) +$78K (additional damages

recovery for actual damages     $ 44K

recovery from                                  $46K ($78K - 31K (40% contingency fee per our retainer agreement)

additional damages

Total to client                                    $90K ($44K + $46K)

Attorney fees and cost                    $31 +attorney fees, cost and expenses to de determine.

[RobertB4444]

Actual damages that are to replace the cost of the car are not taxable.  That is just a reimbursement.  But the additional amount over and above that MAY be taxable.  It depends on what it is for.  If it is the result of physical injury then it is not taxable.  If it was punitive then it is taxable.  You can't deduct attorney's fees from your settlement.  

Here is an article on the types of legal settlements that are taxable.  

And here's an article on deducting legal fees.

@yo2025