Question
Plaintiff brought suit and unless otherwise indicated successfully recovered. Discuss the tax consequences in the alternative following situations: (a) Plaintiffs suit was based on a
Plaintiff brought suit and unless otherwise indicated successfully recovered. Discuss the tax consequences in the alternative following situations:
(a) Plaintiffs suit was based on a recovery of an $8,000 loan made to Debtor. Plaintiff recovered $8,500 cash, $8,000 for the loan plus $500 of interest.
(b) What result to Debtor under the facts of (a), above, if instead Debtor transferred some land worth $8,500 with a basis of $2,000 to Plaintiff to satisfy the obligation? What is Plaintiffs basis in the land?
(c) Plaintiffs suit was based on a breach of a business contract and Plaintiff recovered $8,000 for lost profits and also recovered $16,000 of punitive damages.
(d) Plaintiffs suit was based on a claim of injury to the goodwill of Plaintiffs business arising from a breach of a business contract. Plaintiff had a $4,000 basis for the goodwill. The goodwill was worth $10,000 at the time of the breach of contract.
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