Giants fan Brian Stow got an $18 million verdict for injuries he received in a Dodgers parking lot in 2011. The defendants were the L.A. Dodgers and others, including the two men who administered the beating. Tax attorney Rob Wood discusses the tax consequences for everyone involved, something he wrote about in his Forbes article “LA Dodgers Draw $18 Million Verdict In Fan Beating Case....Before Taxes.”
As for Mr. Stow, his damages were awarded for physical injuries, so he should have no tax liability. Wood believes that the Dodgers will get a deduction for their payment, assuming they pay the damages and do not appeal. Wood suggests that situations like this, where a big company is able to write of damages for bad or negligent conduct, is confusing to many people. But, as Wood says, “That’ our system.” The damage payment would be considered a business expense.
If the case were to be appealed, new issues would enter the picture, such as interest on the award. In some cases, punitive damages are awarded, Interest and punitive damages are taxable to the plaintiff. However, punitive damages would be deductible by the corporate defendant. And attorney fees are another issue. The lawyer owes taxes on any fees collected.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.