Determine the effect on gross income in each of the following cases: a. Eloise received $150,000...

Determine the effect on gross income in each of the following cases:

a. Eloise received $150,000 in settlement of a sex discrimination case against her former employer.

b. Nell received $10,000 for damages to her personal reputation. She also received $40,000 in punitive damages.

c. Orange Corporation, an accn1al basis taxpayer, received $50,000 from a lawsuit filed against its auditor who overcharged for services rendered in a previous year.

d. Beth received $10,000 in compensatory damages and $30,000 in punitive damages in a lawsuit she filed against a tanning parlor for severe burns she received from using its tanning equipment.

e. Joanne received compensatory damages of $75,000 and punitive damages of $300,000 from a cosmetic surgeon who botched her nose job.

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a) Eloise would need to include $150000 in her gross income because this settlement would be interpreted as a compensation for compensatory damages.

b) Nell must include $10000 in her gross income as a compensation for her personal damage. Similarly, her punitive damages of $40000 must also be included in her gross income . So overall, Nell would include $50000 in her gross income.

c) This amount is for compensatory damages for nonphysical damages which means that $50000 should be included in gross income.

d) Since Beth sustained physical injuries, therefore, compensatory damages of $ 10000 will be excluded from gross income and punitive damages of $30000 will be included in her gross income.

e) $75000 will be excluded as Joanne already sustained physical injuries and $ 300000 will be included.

ekkarill92 answered 1 year ago

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