Question

In 2014 Randall suffered bodily injury while at work. In 2016, Randall won a workers' compensation claim and prevailed in an injury lawsuit, both in connection with the 2014 injury. Randall received the following in 2016 as settlement:
Punitive damages $150,000
Workers' compensation 50,000
Reimbursement for medical expenses 25,000
Compensation for emotional distress 15,000
What amount of the settlement should be excluded from Randall's 2017 gross income?
a. $165,000.
b. $90,000.
c. $60,000.
d. $75,000.

Answer 1

Answer:

d. $75,000.

Explanation:

Calculation for the amount of the settlement that should be excluded from Randall's 2017 gross income.

The amount of the settlement excluded from Randall's 2017 gross income will be the addition of the following:

Workers' compensation $50,000

Compensation for emotional distress $15,000

Medical expenses of $10,000

=$75,000

Therefore the amount of $75,000 will be the amount of the settlement that should be excluded from Randall's 2017 gross income.