If the employer packed and lost all my belongs but agreed to pay a small partial amount of the value of the lost, by law do I need to pay income tax for the payment?

How the small court handle this case?

Asked on July 18, 2015 under Employment Labor Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

No, compensation for lost or destroyed property is not income, so long as the compensation is equal to or less than the value (i.e. you're not making a profit).

If you sued the employer and won (proved they lost them), you would receive an amount equal to the current fair market value--NOT the replacement value; what they were worth, given their age and condition when lost--of the items you can prove you owned.

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