Hulk Hogan Wins $140 Million. Windfall For The IRS (And Lawyers) Too.

A Florida jury awarded Terry Bollea, much better known as Hulk Hogan, $115 million in a lawsuit against Gawker Media for publishing footage of him participating in sexual activity four years ago. Jurors found that the defendant acted with reckless disregard publishing the video and awarded Hogan $60 million for emotional distress and $55 million for economic injury. This could increase as jurors still have to reconvene and deliberate whether punitive damages are appropriate.

Lawyers for Gawker argued that Hogan had a long history of publicly talking about his sexual exploits in all forms of print and digital media, which made the tape a matter of legitimate public interest. Further, they warned, a decision in favor of Hogan would have chilling First Amendment implications for all media.

Hogan doesn’t have his money yet as Gawker is appealing but, assuming he prevails, how much will one of the greatest professional wrestlers of the all-time actually pocket? How much of the award will end up in the Hulkster’s bank account after Hogan’s lawyers, and the IRS, take their cut? Let us not forget that the Internal Revenue Service has an interest in such an award. Under IRC §61 gross income is “all income from whatever source derived.” Everything is income unless specifically excepted.

Whether the proceeds of a lawsuit must be included in income depends on all the facts and circumstances of each individual case. It also depends upon the type of injury incurred. In this case, Hogan received awards for both emotional distress and economic injury. Proceeds received for emotional distress or mental anguish that do not originate from a personal physical injury or physical sickness are taxable and must be included in income. However, this amount is reduced by: (1) amounts paid for medical expenses attributable to emotional distress or mental anguish not previously deducted and (2) previously deducted medical expenses for such distress and anguish that did not provide a tax benefit. However, if the Hulk can prove that his emotional distress originated from a physical sickness, none of the proceeds are taxable. Good luck, Hulkster!

As to Hogan’s economic injury, If a settlement is received for lost profits from a trade or business, a taxpayer will report that portion of the proceeds attributable to carrying on his or her trade or business as net earnings. Did the video footage cause the Hulk to lose any work? As the jury in Hogan’s case may still award punitive damages, remember that such damages are taxable and must be reported, even if received in a settlement for personal physical injuries or physical sickness.

Because each case is different and has its own set of facts and circumstances, it is important that upon receiving (or anticipating) any legal settlement, you consult with an experienced and knowledgeable tax attorney to determine the taxable and non-taxable portions of an award. Your experienced tax attorneys and CPAs at Thorgood Law Firm www.thorgoodlaw.com can help answer questions about whether the proceeds of a lawsuit constitute taxable income. For a FREE consultation, call 212-490-0704.
Hulk Hogan Wins $140 Million. Windfall For The IRS (And Lawyers) Too.

Leave a Reply

Your email address will not be published. Required fields are marked *

Testimonials

Categories