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  1. #1
    Join Date
    May 2009
    Posts
    1

    Who makes the most money in Lawsuits

    Who else the government!

    Governments love large lawsuits. Why you ask? The tax laws!

    The person who is suing is subject to special rules by the Internal Revenue Service. The money they receive is split between the person suing and their lawyer, usually 60% person / 40% lawyer. Also I believe often the lawyer will charge the client out of pocket expenses in order to perform their service. Say you get a $10 million settlement. Lets also say that it is completely taxable no punitive damage received (by this I mean no pain and suffering, please let me know if I am wrong here but assume it is all taxable). So the client receives $6 million before taxes. Also I live in California so I will take into account state taxes as well. So you have to report $10 million as taxable income and you pay the lawyer $4 million, your Federal tax is $2,796500 and State of California Income tax of $757,902 so you end up with $2,445,598 out of $10 million dollars. You report $10 million and deduct $4 million on Sch A under Misc Deductions. You think that you are taxed on $6 million dollars but actually for a single person it works out to $10 million income and itemized deductions of $3,701,599 (your Misc Itemized deduction of a 2% floor of your Adjusted Gross Income ($10 million x 2% or $200,000 ($200 thousand) (so where did I get $3,701,599 well the IRS also has a few adjustments if your income is what they consider High (over $159,950). Your taxable income comes out as $10 million - $3,701,599 itemized deduction and $2,333 personal deduction (this is also reduced because of you high income) so you have taxable income of $6,296,068 (wait a minute I didn't get that much - that is what the government calls creative accounting) and the tax on that is for a single person $2,182,279 but don't stop there they also have a special type of tax called Alternative Minimum Tax (that was put into effect for people with high income who supposedly would have high deductions to reduce their taxable income. In effect you figure you tax two ways and so in this instance you have an additional tax of $614,279 added so your tax is $2,796,500 for Federal taxes. I will not go into the state of California tax but I have done this as there was no tax planning was done.

    Of course the lawyer is taxed very heavily as well but is probably incorporated and has all types of options for postponing taxes (retirement, profit sharing, depreciation on asset purchases, expenses of earning this money, meals, travel, motel, ect........). But be assured the government gets a big chunk from him.

    The point is why would the government try to stop large lawsuit settlements when they end up with so much money for doing nothing!

    I would be interested in your comments, questions and thoughts!

    Thanks

  2. #2
    Join Date
    Sep 2007
    Posts
    498

    Re: Who makes the most money in Lawsuits

    Doesn't surprise me one bit. The greediest entity on the face of the earth is government.

    Thanks for sharing.

  3. #3
    Join Date
    Jul 2006
    Posts
    7,767

    Re: Who makes the most money in Lawsuits

    proceeds from a lawsuit are not income. they are compensation for your loss.

    simple case, somebody hits your car with theirs. you get a check. you use that check to pay to have your car repaired. the check is not income and is not taxable.

    a lawyer has a business. all the income from that business is listed, then all the expenses involved in the business are subtracted. this may result in either a profit or loss for the year. only the year's profit is taxed, not the 40% of the $10 million case you heard about. they may have paid expenses on 50 cases and collected nothing on them, so far.

  4. #4
    Join Date
    Sep 2007
    Posts
    498

    Re: Who makes the most money in Lawsuits

    Quote Originally Posted by mumbles View Post
    proceeds from a lawsuit are not income. they are compensation for your loss.

    simple case, somebody hits your car with theirs. you get a check. you use that check to pay to have your car repaired. the check is not income and is not taxable.
    As usual, you don't what the **** you're talking about. That's only partly true:

    Is money won in a medical lawsuit taxable?

    "Punitive damages are taxable, because they do not compensate a person for injury or sickness. They are to punish or deter future intentional or grossly negligent acts.

    Reimbursement for medical expenses might be taxable if the person took a deduction for the amounts paid and then got reimbursed for them, otherwise they are not income.

    Loss of income from being out of work is taxable because it does not compensate for the injury or sickness. Had the injury not occurred, the person would have earned that income and that income would have been taxed as regular income. The fact that the person gets it later does not make it nontaxable On the other hand, if part of a loss of income award is for lost sick pay, then that part is not taxed.

    Amounts needed for future treatment may be taxed in part. They would be treated as reimbursement for medical expenses actually paid out in the future. Medical expense deductions have restrictions. If those restrictions are not met, they could be taxable. Also, if monies given for future treatment are not spent and if they do not have to be returned to the defendant, then they are considered income and are taxable.

    Prejudgment interest on the award is taxable, because this is not compensation for the injury or sickness itself.

    Post-judgment interest on the award is taxable for the same reason.

    Attorneys fees and costs are taxable.

    Essentially, if the proceeds compensate a person specifically for the injury itself, it is nontaxable. If it compensates anything else, even though it occurs as a result of a personal injury or sickness, then it is taxable.

    And, the IRS has the authority to review every settlement agreement to make sure that the gross amount of the award does not contain taxable items."

    See also:

    Settlement Award? Uncle Sam May be Waiting in Line

    How an Insurance Class Action Settlement is Taxed

  5. #5
    Join Date
    Jul 2006
    Posts
    7,767

    Re: Who makes the most money in Lawsuits

    thanx. you are correct.

    that's why we have lawyers and why i try to avoid giving legal advice. i just didn't want people to think that replacement of loss is a taxable event.

    another good example i have been asked about, is, a family member dies, you are the benificiary on the life insurance. is that taxable income? inheritance tax apply? i dun think so, but if somebody dies leaving me millions, i'll sure find out the IRS from somebody that knows.

  6. #6
    Join Date
    Jan 2011
    Posts
    1

    Re: Who makes the most money in Lawsuits

    Proceeds from a lawsuit are not income. I am 100% agree with you, it is such a very good and best information for me, it is very valuable as well as good to share with us.

  7. #7
    Join Date
    Apr 2010
    Posts
    17

    Re: Who makes the most money in Lawsuits

    I have read what everyone has said and I am not surprised at all to see all of this as I work privately with investors who have very large sums of money held in the Private Wealth Division of Wells Fargo and here's something to read and think about that happens with all banks and I mean all banks! If you are not in the private financial industry this may not make any senses to you but stop and think about this because the US authorities is now cracking down on everyone who has found ways to make millions of dollars the legal way and the government is pissed about it and calling everyone fraudulant.

    Read carefully below:

    Investors who have hundreds of millions of dollar at any major bank such as Wells Fargo have found a better way for those large investors to make a higher return on their money then what a bank will offer them, they simply rent/lease their funds/money to a company or person who needs to show large funds on their company ledger in order for them to do commodity/commercial deals worldwide, this is called a lease proof of funds (POF) and the investor will lease/rent their funds to the company/person for a period of 60 days at a time and charge anywhere from 2% up to 10% of the amount that the company/person is needing to show on their ledger. And what makes this safe to the investor is that the investor would allow a sub-account or non-depleating account to be opened under the investors main account, also called their master account and this keeps the investors money in their total control but now allows the company/person who leased/rented the money from the investor to now have an account with their name on it with let's say $100 Million Dollars in it. And now this will allow the company/person to show that they have the credibility now to support whatever transaction/deal that they are trying to close or get into to.

    Let me show you an example of what I mean. Let's say an oil company has a buyer that has come to buy a large amount of oil from them but they do not have that oil in their own port/holdings the selling company would need to go to a large refinery and order the oil that the buyer has asked for but the seller must show that they have enough money to support their order. Now, the buyer is paying the seller more so this means, the buyer is buying at retail and the seller would get the wholesale price and flip the sale directly to the buyer thus making the profit but if the seller doesn't have enough funds in their account to show that they can afford the order then they would not be able to make the transaction happen at all and thus losing a large profit. Now the buyer has already showed and proved to the seller that they have all the funds to buy the oil so in order for the selling oil company to make a profit they will do what is called a flip sale and now is when they look to lease/rent money from a large investor because they can lease/rent the funds that they need to show the refinery that they can support their order. The refinery normally allows 7 days once the oil has been order to be transported to the final place and also payment. Thus making money now for the investor, the seller and the refinery and now transaction has been completed and money is now made and companies stay in business longer.

    Now it's get's better, the government is telling the world that all leased/rented funds also known as proof of funds (POF) are all scams and fraudulant but as you can see above it is a way for the wealthy people to make fast and higher return on their money that is sitting at a bank and they make alot more in those 60 days then any bank would offer them and this allowed a smaller company to start growing but the government doesn't like the fact that all investors normally has a third party also known as an intermediary to do the transaction for them because no large investor has the time nor wants to deal direct with the general public. The intermediary get's paid a commission for these deals and now the government is taking all these intermediaries down and calling them all fraudulant and scammers because they have found a way to work for themselves with large private investors. The government agencies do not like people who are smarter then them or who makes more then them and until the world understands that these are everyday people who are working to make a paycheck, the world will only see everything as a scam instead of seeing the facts with reasons behind the transactions. After all you can do research and see that many attorney's now have given up their practice and have become an intermediary to these type of transactions/deals.

    Now what makes this bad with banks is that if someone becomes under an SEC, SS, or FBI investigation, all the banks play stupid and run for the hills and tell the government agencies that these type of accounts (leased/rented accounts) are not real but they are done everyday in the Private Wealth Department of all banks! So, my advise to people who only listen to the news is to do some serious due diligence on when you see that while you sleep that the United States, Government Agencies and Banks are making hundreds of millions of dollars on your money that is sitting in your account as well as they make money by trading your social security number on the international market thus helping to create more bank notes for them to sell to the international world and that my friends is how we got into this mess. The governments love when babies are born as this now gives a new social security number to have a bank note created for and on.

    My fellow American's please start looking at what goes on behind the banking world because until you understand how money is really made you will see nothing but what reporters report and that is everything and everyone including all investments in the world must be a scam to all American's because we can now be fooled very easy as our ears and eyes have been trained to only believe what is reported and that is what we have all done. If you would research the international trading market, the stock exchange and the private wealth world on how money is really created, you will soon see that thousands of people have been charged with guilt by a jury of it's peers only because they have been programed to believe that everything is fake!

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