Arkansas Administrative Code
Agency 006 - Department of Finance and Administration
Division 05 - Division of Revenues
Regulation 1997-4 - Comprehensive Individual Income Tax Regulations
Rule 26-51-404 - GROSS INCOME GENERALLY
Rule 1.26-51-404(b)(15) - Lawsuit Damages

Universal Citation: AR Admin Rules 1.26-51-404(b)(15)
Current through Register Vol. 49, No. 9, September, 2024

Compensatory and punitive damages are includable in gross income unless the damages are received on account of a personal physical injury or physical sickness. If an action has its origin in a physical injury or physical sickness, then all damages (other than punitive damages) that flow from that injury or sickness are treated as payments received on account of physical injury or physical sickness, whether or not the recipient of the damages is the injured party. However, punitive damages are includable in gross income even if they are received on account of a personal physical injury or physical sickness. IRC Sec. 104(a)(2).

The taxability of damages remains the same whether the damages are received as a settlement or jury award.

Example: damages (other than punitive damages) received by an individual on account of a claim for loss of consortium due to the physical injury or physical sickness of that individual's spouse are excludable from gross income.

Disclaimer: These regulations may not be the most recent version. Arkansas may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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