Are damages paid by the govt taxable?

[kannad...@yahoo.com]

Hello all,

Couple of years back the California Accountancy Board certified my
daughter in law as eligible to appear for the CPA board exam. So my
son and daughter in law spent $2500 on study material for the exam.
Subsequent to this the board declared that it had made a mistake and
my daughter in law was not really eligible. My son appealed to the
state and was awarded damages to the tune of $2500 which he had spent
on study material. The IRS then came after them and asked for $500 to
be paid in taxes on the $2500. Is the boards compensation award of
$2500 really taxable? I have paid the tax for now but really would
like it to be refunded if possible.

Thanks in advance for any advise.

[Arthur Kamlet]

In article <1193687855....@22g2000hsm.googlegroups.com>,

Depends on the nitty gritty facts and circumstances.

My first thought is this is a nontaxable refund of an amount paid for
personal purposes. Like getting a refund for your tickets o the
Super Bowl.

But if fraud was proven and some of the award was punitive
damages, it is taxable. Not likely as settlements almost
never admit any punitive damages.
--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

[ChrisZ]

In article <1122g2000hsm.googlegroups.com>,

I think it should be nontaxable. The OP could have put the amount on a
Schedule C and deducted related expenses of $2500 to net to $-0-

[kannad...@yahoo.com]

On Oct 30, 4:17 am, "ChrisZ" <mails...@cnet.net> wrote:
> In article <1122g2000hsm.googlegroups.com>,

Thanks guys, it was not fraud and not punitive damages. ChrisZ what is
OP? Thanks again.

[Arthur Kamlet]

In article <1193769775.6...@i38g2000prf.googlegroups.com>,

I hope this was not reported on Form 1099-Misc Box 7. Box 3 maybe,
which moves the backing out to Form 1040 Line 21.

OP is you.