Question
Barbara was injured in an automobile accident. She has threatened to file a suit against the other party involved in the accident and has proposed
Barbara was injured in an automobile accident. She has threatened to file a suit against the other party involved in the accident and has proposed the following settlement:
Damages for 25% loss of the use of her right arm $150,000
Medical expenses 30,000
Loss of wages 10,000
Punitive damages 60,000
The defendants insurance company is reluctant to pay punitive damages. Also, the company disputes the amount of her loss of wages. Instead, the company offers to pay her $210,000 for damages to her arm and $30,000 medical expenses. Assuming Barbara is in the 35% marginal tax bracket, will her after-tax proceeds from accepting the companys offer be more or less than the after tax proceeds from her proposed offer? Show all supporting calculations.
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