Tax Advice on Litigation Payments and Recoveries

Mr. Wood has practiced in this area for over two decades. He previously authored BNA's Tax Management Portfolio on this topic (1986). In 1989 Tax Institute published Robert Wood's ground-breaking treatise, Taxation of Damage Awards and Settlement Payments.  Now in its Third Edition, Taxation of Damage Awards and Settlement Payments remains the most recognized book in this volatile area of the tax law. Taxation of Damage Awards and Settlement Payments is frequently used and cited by practitioners, the Internal Revenue Service, the U.S. Tax Court, state and local taxing authorities (such as the California Franchise Tax Board), Congress, and the Circuit Courts of Appeal. Citations to Rob Wood's book appear in U.S. Supreme Court filings.

Wood's tax expertise covers an unusually wide variety of cases, from wrongful death to antitrust, from securities fraud to personal injury, from employment discrimination to broker-dealer litigation. Perhaps more important, we are not focused on the tax position of exclusively plaintiffs or defendants, but routinely consider both a payor's and a payee's perspective. While we generally act as an advocate, we have occasionally served as a kind of tax-issue-mediator for both plaintiff and defendant.

Our work on the tax aspects of cases relates to toxic torts, gender discrimination, sexual harassment, race discrimination, age discrimination, wrongful termination, defamation, securities law violations, fraud, environmental remediation liabilities and fines, will contests, contract disputes, antitrust, palimony and other matters. Our services include advising litigating attorneys and/or principals in the action on tax aspects, drafting or revising settlement documents to reflect a tax-efficient structure, rendering tax opinions to the principals or counsel, and, if necessary, litigating the tax characterization of settlement payments or providing expert testimony on this topic. 

Wood & Porter has consulted on claims or payments in many jurisdictions, including California, New York, New Jersey, Nevada, Texas, Kansas, Florida, Delaware, Rhode Island, Ohio, Connecticut, Illinois, Massachusetts, Minnesota, Montana, Indiana, Idaho, New Mexico, North Carolina, the District of Columbia, Alabama, Arkansas, West Virginia, Wyoming, Georgia, Maine, Guam, England and Germany. The nature of the proceedings have ranged from settlements in advance of trial, arbitration or mediation, negotiation of settlements before the filing of a complaint, and other pre- and post-litigation tax advice. We have also regularly represented taxpayers before the Appeals Division of the IRS, U.S. Tax Court, appellate courts  and state tax agencies concerning litigation payments and recoveries.

Recent representations include:

• Tax adviser on a record setting $60 million discrimination verdict (Issa v. Roadway Package Systems, Inc).

• Tax adviser on a $2.5 million EEOC race discrimination case in Hawaii.

• Represented the ACLU on tax issues arising out of a landmark $1.1 million school harassment case (Flores v. Morgan Hill).

• Provided tax advice to plaintiffs in litigation arising out of 600 unnecessary heart surgeries, as depicted in the book by Stephen Klaidman, Coronary: A True Story of Medicine Gone Awry.

• Provided tax advice to plaintiffs in litigation in the U.S. and Hong Kong arising out of investments in a prominent Hong Kong company.

• Advised the plaintiffs on tax issues in a $39.75 million antitrust settlement with 3M (Bradburn Parent/Teacher Store, Inc. v. 3M).

• Provided tax advice to two plaintiffs in a case generating a $61 million jury verdict.

• Represented the plaintiff in a case involving serial rapist and cosmetics empire heir Andrew Luster, who was ultimately brought to justice by Dog the Bounty Hunter.

• Served as tax counsel in an airline industry whistleblower case involving a $12.5 million verdict (Otto v. North American Airlines, Inc., Alameda County Superior Court).

• Rendered tax advice in a landmark tobacco case involving $50 million of punitive damages that went to the U.S. Supreme Court (Richard Boeken v. Phillip Morris, Incorporated, Case No. BC 226593, Los Angeles County Superior Court).

• Advised on the tax aspects of recoveries for deaths in a nationally publicized burning nightclub incident.

• Tax adviser on a $20 million verdict against Gibson, Dunn & Crutcher arising out of an art appraisal dispute which was the subject of a Wall Street Journal page one article. (See Davies, "Lassos and Lawsuits: Who Really Painted a Cowboy Tableau?", Wall St. Journal, March 16, 2006, p . A1.)