Taxability of Class action suit proceeds from Donofrio v. Auto Owners (Mutual) Insurance Co

[linduca]

Am thinking that the proceeds from this particular class action suit is not taxable.  Checking to see what others have concluded...  questions of how labor depreciation was calculated on claims...(at least that is my understanding)

           Thanks,

                           L

[qbteachmt]

What are you using as reference that any of this is not taxable?

[Just-Lisa-Now-]

what were they paid for?  what is labor depreciation?  what tax forms were issued?

[BobKamman]

Without delving into the case too deeply, it looks like people complained that they weren't paid enough for their claims.  And so the company agreed to pay them some more.  This raises two questions:

1)  Was anything claimed as a casualty loss on their tax return?  If so, the loss would have to be reduced by any insurance payable.  The more insurance proceeds they collect, the less the loss they can deduct.  But not many people claim casualty losses these days. 

2)  Except, was the vehicle used in a business, so the repair costs were deducted and now some of them have been reimbursed?  

Doesn't look like a question that allows for a "one size fits all" answer.  

[qbteachmt]

"was the vehicle used in a business"

It's not a vehicle issue. I looked it up. I would put it like this (very simplified):

You have a household insurance policy that either pays out replacement value to you or pays the repair. Your roof gets damaged and it is at its halfway point in useful life. The insurer chooses the worse option for the homeowner, and also, figures the labor cost is half-depreciated along with the remaining life of the roof being replaced. The loss of the existing roof might only be the remaining half-life, but labor costs what labor costs to replace or repair.

I didn't see anything that isn't taxable about it. It's settlement against the property damage. The argument was how this settlement was determined. Not what it was for.