November 7th, 2023, will mark the 54th anniversary of Pink Floyd's Double LP, Ummagumma. You may be asking: what the heck is Ummagumma? Don't worry, way back in 1969, people listening to the album for the first time were probably thinking the same thing.
While this release was only a few years before the Floyd would release the Greatest Album Ever, Dark Side of the Moon, Ummagumma is, without a doubt, a psychedelic mess. Yet, it's still worth a listen.
Maybe.
If you're either super brave or just wildly curious, you can catch the first song off the album here: Careful with that Ax, Eugene!" https://youtu.be/u9Q6qdR0Fvg
And, that song leads us to this post.
It turns out that, for many tort claims, cloaked within the 2016 Trump Tax Referendum is a doozy of a hidden tax penalty.
Thus, all we can say is Careful with that Tax, Eugene!
So, what's the News? Well, it turns out that hidden within that promise of greener pastures was a spot blighted by Roundup. Dead turf. The 2016 Tax Referendum unfairly penalized those who recovered awards for mental anguish not associated with a physical injury and/or for punitive damages. Indeed, not only does the winner of such an award get hit with the highest tax penalty imaginable, but that tax bill is also based on the full amount of the award - not simply the net amount to the client - and there is no corresponding IRS deduction for the cost of obtaining the award.
What does this mean to the client?
Well, if you, as a client, agreed that your lawyer would receive a fee of 45% of the total recovery, then, after fees and expenses, and then the tax bill, you are going to recover approximately 15 cents on the dollar for the full amount of the award attributable to punitive damages or emotional distress damages that are not the result of a physical injury. In other words, for every $1 million dollars in punitive damages or emotional distress damages, you'll pocket around $150K after Uncle Sam picks your pockets.
Is this fair? NO.
Is it Constitutionally Legal? YES.
This is a situation that often arises in Termite Fraud and Damage Claims litigation. However, it may also occur in negligence, wantonness, and/or other tort claims.
So, what's an injured person to do?
If you have suffered damage to your home as a result of the wrongful conduct of a Termite Prevention Company and your lawyer is pressuring you to go to trial or arbitration without discussing these potential tax consequences, you might want to seek a second opinion.
Why?
Because, while tax evasion is illegal, tax avoidance is legal. Thus, by ensuring that your lawyer uses the proper language in a legitimate settlement agreement, you can likely hang on to way more money after all is said and done!
If you hired a lawyer to make sure you were made whole and this is the first time you are hearing about this tax penalty, I can't tell you that you should call someone else. However, if I could, I might.
Just sayin'
if you have any questions or concerns about this or any legal matter, feel free to give us a call at Cochran Bowers PC: 205-460-1152; 205-970-8882; or 205-616-7662.
All of the standard Bar disclosures apply, like the quality of representation, etc., See Microsoft Word - cond7_2 (alabama.gov).
Cochran Bowers PC
2 Riverchase Ridge, Ste. 150
Hoover, AL 35244
205.790.8882
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