Wes was a major league baseball pitcher who earned $10 million for his 20 wins this year. Sam was also a major league baseball pitcher before a careerending injury caused by a negligent driver. Sam sued the driver and collected $6 million as compensation for lost estimated future income as a pitcher and $4 million as punitive damages. Do the amounts that Wes and Sam receive have the same effect on their gross income

Question

Kayleigh Ibarra

Business

29 November, 06:48

Wes was a major league baseball pitcher who earned $10 million for his 20 wins this year. Sam was also a major league baseball pitcher before a careerending injury caused by a negligent driver. Sam sued the driver and collected $6 million as compensation for lost estimated future income as a pitcher and $4 million as punitive damages. Do the amounts that Wes and Sam receive have the same effect on their gross income

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Answers (1)

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Kendrick Schmidt · Answer 1

Answer explained

Explanation:

The personal injury payment is not taxable. Thus, Sam is not required to pay taxes on $6 million.

This amount is the payment for the injury to sam, so, the amount of 6 million is not taxable.

B.

The amount received by the Sam for the punitive damages of $4 million will be taxed as the income. This is because this was to punish the wrong doer not to the Sam. Thus, the X will be $4 million.