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Arrest and forget - amazing DEA stupidity

Home Forums General Columbus Discussion Everyday Chit Chat Arrest and forget – amazing DEA stupidity

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  • #98185
    hugh59
    hugh59
    Participant

    Student Settles Case Against DEA

    The DEA in San Diego arrests a suspect found in a drug raid. They handcuff him, put him in a holding cell, then forget about him. What amazing incompetence. It is a good thing somebody decided to take a look in that cell (5 days later) otherwise the suspect would have died.

    #547315

    ricospaz
    Participant

    I think it was like $48,000 an hour. not worth it.

    #547316
    hugh59
    hugh59
    Participant

    One irony about this is that he probably has to include the settlement amount in his gross income for tax purposes (and he is probably paying 1/3rd of the settlement to his attorney). Federal taxes will be about $1.2 million; California taxes will be about $372,000. He will only have about $1.12 million after attorney fees and taxes. That is about $9,371 per hour.

    #547317

    Rockmastermike
    Participant

    It was my understanding that damages recovered from physical injury (e.g. dehydration to the point of kidney failure) and medical payments were not taxable income. So it would depend on what part of this was for what kind of damages I guess.

    I just googled and a usually reasonable reliable media source seems to confirm this. http://www.forbes.com/2010/04/29/tax-legal-damages-employment-injury-personal-finance-robert-wood.html

    Doesn’t matter really except for the sake of pointless argument, which i’m not really in the mood for.

    But, this is completely inexcusable behavior and I hope this kid gets to keep every effin’ penny. pisses me right the hell off and it would piss me off even more if this kid gets taxed for this.

    #547318
    hugh59
    hugh59
    Participant

    I should know mike. I wrote my master’s thesis on a related topic: defamation damages and the personal injury exclusion of 26 USC Sec. 104 (a)(2). I guess it depends on how the damages are determined.

    #547319

    mrpoppinzs
    Member

    hugh59 said:
    One irony about this is that he probably has to include the settlement amount in his gross income for tax purposes (and he is probably paying 1/3rd of the settlement to his attorney). Federal taxes will be about $1.2 million; California taxes will be about $372,000. He will only have about $1.12 million after attorney fees and taxes. That is about $9,371 per hour.

    Attorneys fees are capped at 20% and he will pay no federal taxes on settlement amount. He will walk with around ~ $3.2 million minus California taxes.

    I can’t imagine how awful that was.

    #547320
    hugh59
    hugh59
    Participant

    mrpoppinzs said:
    Attorneys fees are capped at 20% and he will pay no federal taxes on settlement amount. He will walk with around ~ $3.2 million minus California taxes.

    I can’t imagine how awful that was.

    mrpoppinzs, thanks for the info. Capped at 20%? Is that a California law? I have not been in private practice for a while; it was not unusual in Ohio for the contingency fee rate to be 33%.

    Regarding the taxation of the damages, much of it depends on what theory they are based on. Damages for personal injuries are exempt from taxation under section 104(a)(2) . Damages for wrongful imprisonment are a different matter. I have not reviewed the code sections yet, but here is an article describing the situation:

    Wrongful Imprisonment Tax Ruling Stirs Controversy[/url]

    Here is a link to the ruling itself:

    Office of Chief Counsel Memorandum No. 201045023

    Short version: Damages awarded based on personal injury are exempt under 104(a)(2); but damages based on other theories are not exempt. So taxability depends on how the settlement agreement breaks down the damages between pain and suffering versus other theories.

    #547321
    Coremodels
    Coremodels
    Participant

    hugh59 said:
    mrpoppinzs, thanks for the info. Capped at 20%? Is that a California law?

    That’s news to me. They had a ballot issue to cap contingency fees at 15% but it failed a couple years ago.

    #547322
    hugh59
    hugh59
    Participant

    Coremodels said:
    That’s news to me. They had a ballot issue to cap contingency fees at 15% but it failed a couple years ago.

    Coremodels, I found that same info. I have been reading a variety of sources, none of which are authoritative (that I would use if I were drafting a client agreement) but other than a limit of 40% in medical malpractice cases, and a general rule against unconscionable fees, I don’t see that kind of limit in California.

    Still, I was wrong earlier when I wrote that the entire settlement was subject to federal taxation. Only part of it is potentially subject to taxation. Okay, I did qualify my opinion by writing, “probably has to include the settlement amount,” but at the time I wrote that, I incorrectly believed that the entire amount would be included in gross income.

    Here is another article on the this topic:

    Tax On Wrongful Imprisonment Needs Reform[/url]

    #547323

    mrpoppinzs
    Member

    Since attorney fees are capped at 20 percent of damages and the settlement payment is tax-free, Chong will collect at least $3.2 million, Iredale said. Chong, now an economics student at the University of California, San Diego, said he planned to buy his parents a house

    Read more: http://www.foxnews.com/us/2013/07/31/student-left-in-dea-cell-to-get-4-million-from-us/?test=latestnews#ixzz2aiOMQKlM

    #547324
    hugh59
    hugh59
    Participant

    mrpoppinzs said:
    Since attorney fees are capped at 20 percent of damages and the settlement payment is tax-free, Chong will collect at least $3.2 million, Iredale said. Chong, now an economics student at the University of California, San Diego, said he planned to buy his parents a house

    Read more: http://www.foxnews.com/us/2013/07/31/student-left-in-dea-cell-to-get-4-million-from-us/?test=latestnews#ixzz2aiOMQKlM

    Okay. That is a good source. That is an Associated Press report. Iredale is one of Chong’s attorneys. The 20% limit is probably based on the contingency fee agreed to in the representation agreement, not based on state law. I would expect the lawyer to know the terms of his or her own agreement. Still, the Iredale may not be entirely correct concerning the taxation of the settlement since even experienced tax attorneys can get confused by section 104(a)(2).

    In case someone gets concerned over the Fox News source for this AP report, here is the same story at the Washington Post.

    US To Pay $4 Million To San Diego Student

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