My mother died in 2002. She spent the last 5 months of her life in the hospital due to medical malpractice.?

by **garwyli91** » Wed Mar 28, 2012 9:02 am

I just received a settlement from the malpractice suit my sisters and I filed in my mothers behalf. I was told this was not considered taxable income. I want to be sure about this so I do not get in any trouble with the IRS. Please advize.

by **hrafn** » Wed Mar 28, 2012 9:04 am

Unfortunately, the answer is: it depends.

You should consult a tax advisor, but here is a rough guide:

# All punitive damages are taxable.
# Interest portion of proceeds should be reported as income.
# After 1996, the only amounts excludable are those received in a case of physical injury or out-of-pocket costs for medical expenses incurred to treat emotional distress.
# For out-of-court settlements, a proper allocation must be made between compensatory and punitive damages.
# Taxable amounts should be reported gross rather than net of legal fees.
# Legal fees should be reported on Schedule A as miscellaneous itemized deductions and are a tax preference item for AMT.

Sorry for your loss.

Updated:

Is this a wrongful death case? If so, then read this:

http://www.bankrate.com/dls/itax/tax_adviser/20061229_wrongful_death_settlement_a1.asp

Not taxable to you and your sisters, but part of mom's estate which may make it high enough to be taxed. Again, I think it would be wise to consult a tax pro here.

by **hampton83** » Wed Mar 28, 2012 9:13 am

I believe that since the suit was awarded to the family of the deceased that it is not considered taxable income. Just to be sure you should consult an attorney. Just call around you don't have to hire one to find out the answer.

by **adelphos** » Wed Mar 28, 2012 9:15 am

I believe that since the suit was awarded to the family of the deceased that it is not considered taxable income. Just to be sure you should consult an attorney. Just call around you don't have to hire one to find out the answer.

Go to irs.gov and look for this, or call them at 1-800-829-1040.

by **winwood** » Wed Mar 28, 2012 9:17 am

Go to irs.gov and look for this, or call them at 1-800-829-1040.

by **condan** » Wed Mar 28, 2012 9:19 am

Medical treatment errors are one of the top ten reasons for death.
Errors in medical treatment can take place at various stages of treatment.
More information with prevention for this is available at http://errors.in/medicaltreatment.html

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