News & Events

News & Events

6.30.2016

New Tax Guidance on Wrongful Imprisonment Damages

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Jeremy Babener and Justin Hobson co-authored an article about the June 16 update from the Internal Revenue Service (IRS) regarding tax benefits for victims of wrongful incarceration titled “New Tax Guidance on Wrongful Imprisonment Damages.” The article examines the newly enacted Internal Revenue Code section 139F, which addresses the tax treatment of damages for wrongful imprisonment, as well as the list of Frequently Asked Questions (FAQs) from the IRS regarding the tax reporting of wrongful incarceration damages.

The list of FAQs clarify that damages for derivative claims received by a family member of a wrongfully convicted individual (e.g., damages relating to loss of consortium or companionship) may not be excluded from income under section 139F. The guidance does not address damages for non-derivative claims paid to family members.