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January 2016 Archives

Settlement Claims Are Not Capital Gains, Federal Circuit Rules

As if guiding taxpayers away from the hazards of the tax code, the Federal Circuit drew a line: settlement payments are not capital gains; they're regular income.

The difference between capital gain and regular income is material when the different tax liabilities are taken into account. In either case, settlements paid in exchange for someone to go away do not qualify as a "sale or exchange of a capital asset."