acct401 gdb2 reply

acct401 gdb2 reply - is also taxable only when it is...

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RE: Types of Damages There are four types of damages i.e. loss of income, expenses incurred, property destroyed and personal injury (Willis, Hoffman, Maloney & Raabe, 2010). Loss of income would be taxed as if the individual worked for the income. It is a replacement for the income an individual would have earned. However, Worker’s Compensation is not taxable. There reason is that these payments are for future income that was loss because of accident or incident. The exclusion applies to these payments as not included in gross income (Willis el al., 2010). If one has a disability pension from a related work’s compensation payment it would be not fall under the exclusion rule. Now if one has a disability pension that is part of the work’s compensation, that portion is then tax exempt. There are other disabilities that are non-taxable as well. The expense incurred damages are taxable after the recovery expense is deducted. The destroyed property
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Unformatted text preview: is also taxable only when it is realized as a gain. When the payment from the destroyed property is in excess of the value of the property involved, then that gain is the taxable portion. The personal injury damages are two parts compensation or punitive. The punitive damages are taxable because they are meant to hurt the other individual involved. The compensation damages are from personal injury or physical sickness these payments are not included in gross income and therefore, non-taxable. References: Internal Revenue Service. (2011). Publication 525 - Main Content. Retrieved 6th April 11, from IRS.gov: http://www.irs.gov/publications/p525/ar02.html#en_US_publink1000229314 Willis, E., Hoffman, W. H., Maloney, D. M., & Raabe, W. A. (2010). Federal Taxation. Mason: South-Western Cengage Learning....
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acct401 gdb2 reply - is also taxable only when it is...

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