Structured Settlements Definition

In recent years structured settlements have been an attractive method by which to settle large civil damage suits. Damages on the account of personal physical injury physical sickness and workers compensation are income tax free due to exclusions provided in irc section 104.

Legal Protection For People Receiving Structured Settlements

About Waterville Advisors Structured Settlements

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We represent plaintiffs in and around the new york city nyc area including brooklyn bronx and manhattan.

Structured settlement irs code. The amendments made by this section enacting this chapter other than the provisions of section 5891d of the internal revenue code of 1986 as added by this section shall apply to structured settlement factoring transactions as defined in section 5891c of such code as so added entered into on or after the 30th day following the date of the enactment of this act jan. In the periodic payment settlement act of 1982 the us. 1954 irs code section 104 was created to ensure cash settlements of personal injury cases are tax exempt. Historical review of changes affecting structured settlements. It was revised to include settlements involving periodic payments in 1983. A more detailed explanation of the internal revenue code definition of structured settlement appears in section 1603 of. Because of this unusual combination of state law requirements and federal tax sanctions. Irs makes structured settlements more secure. Certain recent changes in the tax laws however appear to make these structures even more secure and thus more attractive than before. The internal revenue code irc has reinforced the state statutes by imposing a 40 percent federal excise tax if a transfer of structured settlement payment rights does not receive the required court approval. The new york city lawyers at kleinick law can help you with a structured settlement if you are receiving compensation for a birth injury case. A structured settlement under the tax codes terms is an arrangement that meets the following requirements. Birth injury structured settlements tax code irs section 130 tax code. While it is true that structured settlements particularly in personal injury cases have significant tax benefits there are instances where a plaintiff could still find him or herself paying state or federal taxes on a structured. Congress adopted specific tax rules to encourage the use of structured settlements to resolve physical injury tort cases.

The internal revenue code uses the phrase periodic payments in the section irc 104a2 that excludes from income tax amounts received from a personal physical injury or physical sickness. There is hereby imposed on any person who acquires directly or indirectly structured settlement payment rights in a structured settlement factoring transaction a tax equal to 40 percent of the factoring discount as determined under subsection c4 with respect to such factoring transaction. Internal revenue code section 104a2 was amended to clarify that periodic payments constitute damages which are tax free to the injured party. Of course the above is just a broad outline of how structured settlements are treated under the us.