Carnahan lawsuit verdict

Consider this case recently presented on a network news show (can't
remember which): Woman wins 1.5 million dollar sexual harassment suit.
She gets approx. $330,000, lawyers get rest. Now she has to pay tax on
the whole award and has a net loss of $100,000! Don't know the details
of the tax law involved, but those are facts as presented on the the
show.

Judah wrote in message . ..
The best part is that at the end of the day, the Carnahans will probably
owe money anyway.

The only one who makes any money in these stupid lawsuits is the lawyers.

"lowflyer" wrote in message
om...
Consider this case recently presented on a network news show (can't
remember which): Woman wins 1.5 million dollar sexual harassment suit.
She gets approx. $330,000, lawyers get rest. Now she has to pay tax on
the whole award and has a net loss of $100,000! Don't know the details
of the tax law involved, but those are facts as presented on the the
show.

That wasn't Monica, was it?

wrote in message ...
In article , Dan Luke says...

"Judah" wrote:
The best part is that at the end of the day, the Carnahans will
probably owe money anyway.

To whom?


The IRS.
-----------
http://www.cbsnews.com/stories/2004/...in592779.shtml


IRS Turns Victory To Defeat


Cindy Spina should be one of the happiest people around.

She finally won a sexual harassment lawsuit against her employer. It took
six
long years.

"I was elated," says Spina. "I can't even describe how I felt - I felt so
good."

She was awarded $1.5 million, including fees for her attorney.

But then, as CBS News Correspondent Lee Cowan reports, the IRS got
involved.

"This is where it gets to be Alice in Wonderland time," says attorney
Monica
McFadden.

After legal expenses, Spina was left with $375,000.

But the IRS wanted $475,000 in taxes. So not only did she have to give up
her
entire award, but she owed the $100,000 tax bill.

"It felt like my victory was taken from me," says Spina.

And she is not alone.

"It's happening to every civil rights plaintiff that wins a lawsuit," says
McFadden.

They are victims of a little known portion of the U.S. tax code called the
Alternative Minimum Tax, or AMT.

It's no mistake, says David Cay Johnston, author of "Perfectly Legal."

"The Alternative Minimum Tax is like a parallel universe," says Johnston.
"Think
about a "Star Trek" episode - there's the world here, and then there's
this
parallel evil world over here."

Cindy was beamed into that world when, like any taxpayer, she thought she
could
write off the cost of her attorney. Under the AMT, though, everything that
went
to her attorney was counted as income.

"Everyone knows she doesn't get this income," says McFadden. "Congress
knows,
the courts know, I know, the defendants know, the world knows, but
according to
the IRS, it's her money."

The U.S. District Court in Chicago was sympathetic. The judge knew an
award that
size would automatically trigger the AMT, and in the end, would produce
what
even he called an "unjust result." But his hands were tied. If there were
shortcomings in the law, he said, it was up to Congress to fix, not the
courts.

That's the same argument even the IRS makes.

In fact, the IRS is expected to warn Congress this week that the AMT is
the
biggest problem facing American taxpayers.

"All along the system is an acknowledgement that this is broken, but we're
not
fixing it - we don't have the will yet to fix it, and it is in Congress'
hands,"
says Nina Olsen, of the IRS.

And unless something changes, attorneys fear perfectly legitimate civil
rights
cases may never be brought because winning may leave clients worse off
than
losing.

"To have to say to this person, 'Guess what, you're going to get screwed,
and I
can't do a damn thing about it,' you feel powerless," says McFadden.

"It doesn't seem right, and it doesn't seem fair that you can win a
victory and
have to pay out of pocket," says Spina. "It doesn't seem like the American
way."

It all leaves Spina wondering whether it would have been better to suffer
her
harassment in silence than to have gone to court and be stuck with a tax
bill
more than twice her income.

I rather suspect Dan will spin this like a top!

"Tom Sixkiller" wrote in message ...
"lowflyer" wrote in message
om...
Consider this case recently presented on a network news show (can't
remember which): Woman wins 1.5 million dollar sexual harassment suit.
She gets approx. $330,000, lawyers get rest. Now she has to pay tax on
the whole award and has a net loss of $100,000! Don't know the details
of the tax law involved, but those are facts as presented on the the
show.

That wasn't Monica, was it?

No, in today's legal world Bill could have sued her for sexual
harrassment and won, but she didn't have deep pockets, only a deep...

"lowflyer" wrote in message
m...
"Tom Sixkiller" wrote in message
...
"lowflyer" wrote in message
om...
Consider this case recently presented on a network news show (can't
remember which): Woman wins 1.5 million dollar sexual harassment suit.
She gets approx. $330,000, lawyers get rest. Now she has to pay tax on
the whole award and has a net loss of $100,000! Don't know the details
of the tax law involved, but those are facts as presented on the the
show.

That wasn't Monica, was it?

No, in today's legal world Bill could have sued her for sexual
harrassment and won, but she didn't have deep pockets, only a deep...

I notice NOW has been unearthly quiet since then, as opposed to their
hysteria just prior.

Sigh...where to start? ...

Tom wrote "No, it will most emphatically NOT be tax free."

First, you'll notice that I said "Most or all" will be tax free. Some
definitely will be, perhaps not all, but perhaps all will be. Without
knowing the elements of damages awarded, the taxable/tax free portion
can't be determined by us.
Secondly, before you get into a debate on this point I suggest you
come armed with some knowledge. Take a look at U.S. Tax Code sec
104(a)(2).

Tom's second response was just a series of "HAHAHA..." Neither
intelligible, nor intelligent. No further comment needed.

His third comment, "You better laugh...at yourself", was similarly
well reasoned.

Bill Denton commented that the lawyers may have just fronted the
expenses, and that it is charged back to the client at the end. I
agree that the expenses are usually just fronted, but not always,
especially if the fee is sufficiently large, as it probably is here.
Even so, if $30,000 of expenses were "charged back" (i.e., repaid),
the net recovery to the Carnahan family would still be $2,470,000
(instead of $2,500,000). Remeber-my original post was in response to
the comment by Judah that "The only ones who make any money in these
stupid lawsuits is the lawyers." I'd say that $2,500,000 (or
$2,470,000, or even $2,000,000) to the Carnahans pretty well disproves
that.

Tom again hit us with a brilliant observation (I wonder what degree of
experience or qualification he has to make this statement)..."And
there is no incentive for a lawyer to minimize expenses." Take it
from someone who does know, having been a practicing attorney for over
28 years, those expenses are almost always "eaten" by the lawyer if he
loses. So, there most definitely is an incentive to be efficient.
While you might find an anecdotal story of an attorney filing suit
against a client for unreimbursed expenses, I can tell you that I have
never heard of it. Besides, if the attorny sued the client for th
expenses of a lost case, this is the very best way to invite a
malpractice cases as a counterclaim gainst the lawyer!

Judah then wrote: The lawsuit was stupid because there was "clear and
objective evidence that the defendants equipment was IN NO WAY
responsible... ." (Emphasis added) Well, apparantly not so!! If that
were the case, the suit would have been thrown out on summary
judgement, a common occurance with nonmeritorious lawsuits. Also, a
jury had to be convinced by a preponderance of the evidence (unanimous
verdict required in most civil suits in Federal Court; typically
two-thirds or three-fourths of the jury in state courts) that the PH
product was a, or the, contributing cause of the crash. Ergo... it
couldnt have been stupid, unless two thirds or more of the jury were
stupid (and judging from the degree of intelligence some posters
exhibit, there is apparantly no shortage of those.)

Judah, I dont know the case you refer to regarding the winner owing
money after taxes. However you should know that some recoveries are
taxable, e.g., some discrimination and other types of cases. Of
course, this was not such a case.

Also, I seriously doubt that the defense lawyers were paid seven
figure fees. Granted, I don't know (of course, I venture that you
don't either) but, again based on experience, the defense fees and
expenses may well have have not even reached six figures and if so,
probably low six figures. They are paid on an houly basis and get
paid, win or lose; the plaintiff lawyers get paid, typically although
not always, on a contingency fee. If they lose, they get zip. BTW,
the prevailing contingency fee is one-third, although some go to 0% or
even 50% (vary rare). On the other hand, some are lower than
one-third.