ANSWERS: 1
  • Settlement money, such as an insurance settlement, is taxable unless it is received for a physical injury or illness resulting from a wrongful act, according to MoneyCentral.com. Therefore, a settlement received as a result of a driver breaking a traffic law, hitting, and injuring someone will be tax-free. A settlement received for a breach of contract will be taxed.

    Source:

    Moneycentral.msn.com: Win in court without losing to the IRS

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