client's attorney failed to properly file wrongful death case for child. to avoid malpractice suit, attorney is giving client promissory note for amount that would have been collected had case been settled. Is this exempt from income tax?
First, client is only getting a piece of paper. As a cash basis taxpayer, an unsecured promise to pay is probably not taxable. Next, is this a malpractice settlement or a wrongful death settlement? If malpractice, it is probably taxable income when and if client receives money. If wrongful death, probably not taxable when money received because it is on account of personal injury.
But, further research on your part is required.
