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The Tax Twist Behind Selling Your Lawsuit Claim
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Subscribe28 OCT 2025 / ACCOUNTING & TAXES
Selling or transferring a lawsuit claim can have unexpected tax consequences, as the Internal Revenue Service (IRS) treats it as a financial transaction. Depending on the timing of the sale relative to the certainty of the lawsuit's outcome, the original plaintiff or the buyer may be responsible for the tax. Participating parties need to properly document the transaction and may need to seek professional tax advice to mitigate liabilities.
Selling a lawsuit claim might sound like a smart “cash-out move,” but the IRS has its own playbook, and it’s not forgiving.Ever thought about cashing out your lawsuit like it’s a poker hand that’s “good enough” to walk away with? Not so fast. That early p...
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