Question About Taxing Compensation

I couldn’t think of a good title for this, but basically what I am wondering is about those 400 Super Bowl ticket holders who were not able to go to their seats. The NFL has offered something like three times the value of the ticket, tickets to annother Super Bowl, various things. They are also being sued by some who do not think that is good enough.

THe qeustion if someone accepts the NFL’s offer do they have to pay taxes? If they go to court and win some sort of compensation then do they have to pay taxes of any kind?

IANAL but getting awarded something over and above what you paid but never delivered falls under compensatory damages and is not taxable. That happens a lot in the travel and hospitality industry for complimentary upgrades and vouchers among other things. You generally don’t have to pay taxes on compensatory gain if it is given to you for a breach of contract whether it is voluntarily by the company or if you win it in court.

The only way they would have to pay income taxes (that I know of) is if they went to court and won some type of punitive damages that are meant to punish the NFL by giving substantial monetary awards to those ticket holders. That is unlikely to happen but punitive awards can be treated as taxable income for people that win such claims in court.