Posted on 06/07/2009 7:03:56 AM PDT by george76
After several courtroom battles, Marrita Murphy lost. Her case attracted widespread interest because it involved an important question -- and also because she initially won a major round in court.
The issue: Should Ms. Murphy have to pay federal income tax on a $70,000 award she received from a former employer for emotional distress and loss of reputation? She argued the award wasn't taxable. She paid the tax -- more than $20,000 -- and later sought a refund.
In 2006, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled in her favor.
The court concluded that the $70,000 award wasn't "income" within the meaning of the 16th Amendment, which was enacted in 1913.
The court also said a 1996 tax law was unconstitutional insofar as it allowed taxation of awards for mental distress and loss of reputation.
The judges wrote that Albert Einstein "may have been correct that 'the hardest thing in the world to understand is the income tax' … but it is not hard to understand that not all receipts of money are income."
The case was far from over, however.
(Excerpt) Read more at online.wsj.com ...
Tyranny.
They’re taxing our souls.
Now, verdicts will have to “gross up” the award so that it will also cover the taxes that need to be paid, so the injured party can truly be made whole.
She should be able to go back to the employer and make them pay the taxes as consequential damages.
I don’t know which is the greater abuse of power, the IRS or the Justice Department and its FBI.
The reason they're hard to differentiate is that they're all in it together.
The is no law supporting compulsory income tax.
This should get interesting at the next round of tea party’s
I believe a compelling argument can be made that reputation and emotional stability are personal capital assets, and that damage to those assets are deductible capital losses under IRS regulations which would offset gains derived from court ordered monetary recovery for those damages.
Thus, if the IRS rules that recovered damages are income which should be taxed (which is specious and contrary to long established previous rulings), then common sense dictates that the offsetting deduction should be allowed, resulting in no increase in tax burden.
(I know, I know, since when has the IRS or other government entities ever applied common sense in rules, regulations, or governance.)
After their legal bills, I wonder how much ( if any ) money will be left ?
In the case of Bill Clinton vs Paula Jones, she actually came out in the hole, no pun intended, as she wound up owing and paying more money than she actually got.
Her attorney fees were not allowed to be expensed against the award and as such she had to pay tax on the entire award and after paying taxes on the entire award in additon to her attorney fees she wound up in a worse position than if she had never sued.
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