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Attorney’s Fees and Payment
The trial court granted petitioner’s attorney’s motions for
attorney’s fees under FEHA’s fee-shifting statute. The State of
California ultimately paid petitioner $2,349,039 (the jury award)
in 2002, which included the economic and non-economic damages,
statutory attorney’s fees, and interest. The attorney’s fees
under FEHA’s fee-shifting statute plus interest thereon totaled
$537,841. Petitioner agreed, however, to pay Mr. Faust a fee of
40 percent of the jury award, $928,576. The State of California
also issued petitioner Form 1099-MISC, Miscellaneous Income, to
report the $2,355,039 jury award.3
Petitioner and her husband met with attorney Robert Wood to
discuss the tax implications of the jury award. Mr. Wood is a
nationally renowned expert on the taxation of legal awards.
Before the meeting, Mr. Wood reviewed several documents related
to the trial and the Form 1099-MISC the State issued to
petitioner. The record is not clear what tax advice, if any, Mr.
Wood rendered.
The Income Tax Return for 2002 and the Deficiency Notice
Petitioner and her husband timely filed tax returns for 2002
as married persons filing separately. Petitioner and her husband
3The amount of the check is $6,000 less than the amount on
the Form 1099-MISC, Miscellaneous Income. Respondent concedes
that petitioner did not actually receive, and is therefore not
taxable on, this $6,000.
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Last modified: May 25, 2011