How do I treat "smart money" and "punitive damages" on my tax return ?

Answer 1

Enter punitive damages as "Other Income" on line 21 of 1040 with exception to Special Wrongful Death Circumstances in which the punitive damages are not taxable. Emotional distress and discriminatory damages are awarded as Compensatory Damages and are either taxable or nontaxable determined by the specificity of the damage in which the award is given. I have never heard of the term "smart money" as anything other than an investment magazine. In any case, be sure to consult with a tax professional prior to filing.

Answer 2

"smart money" is not a tax term so you will need to define that to get an answer. Punitive damages are normally considered income with the exception of some discrimination cases. In any case you should seek the assistance of a tax professional as there may be alternative ways of dealing with these issue3s in your return that will be favorable but that would require much more information than this forum allows space for.

Answer 3

Punitive damages are considered income, compensatory damages usually aren't. I am not sure what you mean by smart money.

I would strongly suggest you seek the advice of a tax professional.