Posted 21 November 2013 - 08:27 AM
Is this some kind of weird homework assignment? I'm not clear why the ultimate question would be about the tax deductibility of a settlement payment, precisely what you mean by "how did [he] deduct [it]" query.
I'll echo PG's advisory "warning" with http://espn.go.com/blog/nfceast/post/_/id/58944/j-j-wilcox-suffers-head-injury a twist: (Many) legal issues are complicated. Explanations and comments here might not fully identify or explain the ramifications of your particular problem. I do not give legal advice as such (and such is impermissible here at any rate). Comments are based on personal knowledge and experience and legal info gleaned over a quarter century, and every state has differing laws on and avenues to address most topics. If you need legal advice, you need to consult (and pay) a professional so that you may have someone to hold accountable. Acting on personal and informational advice from a stranger on the internet is a bad idea -- at least not without your own thorough due dilience/research and confirmation as it applies to your situation.
Posted 22 November 2013 - 01:20 AM
How did John deduct $100,000 in his tax?
Given the actual question that you asked, all I can say is that I don?t know how Dr. John deducted the $100,000 payment. Only he could tell you what he did.
If, as I assume, what you really meant to ask was whether the payment was deductible and, if so, how the deduction is done, then your post lacks the essential information needed to give you a specific answer. It matters what kind of tax (income tax, franchise tax, gross receipts tax, or something else), which jurisdiction is imposing the tax (U.S. federal government, one of the U.S. states, some other nation, etc), how the doctor?s medical practice is organized (corporation, LLC, some kind of partnership, sole proprietorship, etc) and the exact details of the settlement and how the payment was made. In short, this is not quite the simple question you perhaps envisioned it to be. But if you can provide some additional facts, it may become rather simple.
I?ll give you one example. Let?s assume that Dr. John is the sole owner of the medical practice and operates it as a sole proprietorship. Dr. John is a U.S. citizen and his medical practice is conducted entirely in the U.S. The malpractice claim was filed in the courts of some U.S. The settlement is a typical settlement in which Dr. John agrees to pay the $100,000 to the patient to settle all claims against the doctor but in which Dr. John does not admit to any malpractice.
Dr. John now wants to know if his $100,000 payment to the patient is deductible on his U.S. federal income tax return. The answer to that is yes, it is deductible under Internal Revenue Code (IRC) section 162, which allows deductions from gross income for the ?ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.? Because he operates as a sole proprietor, he takes that deduction on the Form 1040, Schedule C. Note that the deduction does not depend on whether or not Dr. John reported the alleged malpractice to his malpractice insurance carrier.
By the way, given that the question you ultimately asked is a tax question, it would have been better to put it on the Bankruptcy, Debt, and Taxes board. It is much more likely to be seen by a tax lawyer there than here. I almost didn?t look at your post as I don't often answer medical malpractice questions.
<br>For the original version including any supplementary images or video, visit http://boards.answers.findlaw.com/index.php/topic/228259-gross-negligence/