Undifferentiated lump sum in settlement of the whole claim

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Reference no: EM131304627

Farmer Giles fed grain, purchased from the Fowl Supply Co Ltd in November 2013 to his fowls, as a result of which most of his fowls died. He lost profits on egg sales from 2013-2015 amounting to $250,000, had a 3 year contract to supply eggs to a large supermarket chain from 2014-2017 cancelled (from which he expected to earn $100,000 a year profit), and had his reputation as a reliable producer destroyed so that the goodwill of his business dropped considerably, with the result that a prospective purchaser who was prepared to pay $1,500,000 to acquire his business, withdrew the offer.

He brought an action in damages in February 2015 against the Fowl Supply Co Ltd claiming lost profits (past and future), costs of replacing the dead fowls of $205,000, and damages of $350,000 for loss of reputation.

How would his receipts be taxed if he was awarded either all of the above by separate awards for each item or an undifferentiated lump sum in settlement of the whole claim?

Reference no: EM131304627

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Undifferentiated lump sum in settlement of the whole claim : Farmer Giles fed grain, purchased from the Fowl Supply Co Ltd in November 2013 to his fowls, as a result of which most of his fowls died. He lost profits on egg sales from 2013-2015 amounting to $250,000, had a 3 year contract to supply eggs to a lar..

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