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22.23 Damages – Attorney’s Fees and Taxes

Attorney’s Fees and Taxes

Any award that you might make to [plaintiff’s name] in this case is not subject to federal and state income taxes.  Thus, you should not consider taxes in fixing the amount of any award.  You are also instructed that if an award is made to [plaintiff’s name], it would be subject to a substantial attorney’s fee.

{CommentRecently enacted federal legislation subjects awards for punitive and purely emotional damages to federal income taxation.  See 26 U.S.C. ‘ 104(a)(2) (1996) (this provision does not apply to wrongful death actions and, as provided under state law, to civil actions where only punitive damages may be awarded).}

Source:

Sammons v. Ridgeway, Del. Supr., 293 A.2d 547, 551 (1972); Gushen v. Penn Central Transp. Co., Del. Supr., 280 A.2d 708, 710 (1971)(in award of damages no account should be taken of taxes on future earnings); Abele v. Massi, Del. Supr., 273 A.2d 260 (1970).

Credit: Delaware Superior Court